As we enter the fourth quarter of 2022 and begin to plan for next year, we wanted to let you know that the gift tax annual exclusion and the estate and lifetime gift tax exemption amounts are expected to increase due to inflation in 2023. The estate tax exclusion will see a significant increase compared to increases in the previous few years.
The gift tax annual exclusion will increase from $16,000 to $17,000 in 2023. This exclusion allows a taxpayer to gift this amount to any number of individuals each year without incurring gift tax or using any of the taxpayer’s lifetime exemption. Married couples can gift split, allowing them to gift up to $34,000 (in 2023) to each recipient.
With inflation adjustments, each taxpayer will be able to transfer an additional $860,000 ($1,720,000 for married couples) free of transfer tax liability beginning in 2023 via the increased estate and lifetime gift tax exemption. Note that the exemption is still set to sunset back to $5,490,000 per taxpayer (indexed for inflation) at the beginning of 2026.
Please do not hesitate to reach out to a member of our team should you wish to discuss this further.