Annual Exclusions and Lifetime Transfer Tax Exemption for 2023

The gift tax annual exclusion increased to $17,000.00 per donee for 2023. That means you can gift $17,000 per year to as many persons as you want during 2023 and pay no gift tax. Gifts made above that amount must be reported on a Gift Tax Return due when your Income Tax Return is filed. The amount of a gift over $17,000 in 2023 will reduce your lifetime exemption amount by that amount.

Despite some talk in Washington during 2022 about changing the gift and estate tax and the gift and estate tax exemption, Congress passed no changes to the law for 2023. Of course, as of this writing there is still time for Congress to act on those provisions retroactive to Jan 1, as each day passes that probability decreases. That seems especially true since the conversation out of Washington seems to have focused on different issues of late. As of this writing, the exemption for gifts made during lifetime and gifts made at death is $12,920,000.00 per person. The exemption is a lifetime exemption so it includes taxable gifts made during lifetime and those made at death. That means a married couple can transfer double that amount during lifetime or at death without incurring taxes. Remember, the exemption will decrease by half on January 1, 2026 unless the law changes in the meantime. The tax for amounts transferred over the exemption amount is 40%.

Remember, your gross taxable estate includes all assets you own and all assets to which ownership is attributed to you at the time of your death. Your gross taxable estate includes the value of life insurance paid as a result of your death, your retirement accounts, accounts, stocks, bonds, personal property, real estate, cryptocurrency, and all other property. If your estate is near the exemption amount or may become near when the exemption is halved in 2026, we should discuss options that may be available to you to assure the 40% estate tax has the least impact on your estate.