Annual Gift Tax & Estate Tax Exclusions for 2023 – Law Office of Sean D. Ethington

Although inflation is generally nothing to be pleased about, the IRS recently announced inflation adjusted changes to the annual gift tax and estate tax exclusions for 2023.
If you are considering wealth transfer tax planning, these are welcome increases.
Annual Gift Tax Exclusion
Effective January 1, 2023, the annual gift tax exclusion will increase from $16,000 (2022) to $17,000 (2023) per recipient. This means you can gift this amount to as many people as you wish in 2023 without impacting your lifetime gift and estate tax exemption. Married couples who gift split may gift a combined $34,000 per person in 2023 without making a reportable gift.
Combined Gift and Estate Tax Exemption
Another significant change, effective January 1, 2023, is the combined gift and estate tax exclusion increase. It is currently $12.06 million (2022) and will be increasing to $12.92 million (2023) or $25.84 million for a married couple (2023). In other words, starting January 1, 2023, individuals can now gift an additional $860,000 tax-free, and married couples can now gift an additional $1.72 million tax-free.
The combined gift and estate tax exemption is the total amount of gifts a person may make during their lifetime, including transfers made at death, before triggering an estate tax. If you were to pass away in 2023, your estate will not be taxed unless your lifetime gifts and remaining estate exceed $12.92 million for single individuals, or $25.84 million for married couples. For obvious reasons, estate taxes currently impact very few families.
Looking Ahead
That being said, the current Tax Cuts and Job Act expires on December 31, 2025, and the above exclusion amounts will revert back to 2017 levels (as adjusted for inflation) unless Congress intervenes and extends the Act. The 2017 annual gift tax exclusion was $14,000 per person ($28,000 for married couples), and the 2017 gift and estate tax exemption amount was $5.49 million per individual ($10.98 million for married couples).
There are a variety of planning strategies available to take advantage of these more significant exemption amounts before they are no longer available. If you have questions about how you can benefit from the increased tax exclusions, speak to an experienced attorney to determine the best strategy for you.
For more information please contact the Law Office of Sean D. Ethington at (661)295-4604 or visit our website at www.ElderLawSite.com.