Gift Tax

The Gift Tax was created to limit the amount you can transfer to someone as a gift, with annual and lifetime exclusions created to prevent taxpayers from avoiding income taxes. A gift that the IRS may assess includes cash, real estate, vehicles, artwork, and marketable securities. The Gift Tax helps the IRS to monitor high net-worth individuals as a preventative measure and record keeping for the gifting of valuable assets.

Taxable gift exemptions include gifts not over the annual exclusions of $17,000 and $18,000 per individual ($34,000 and $36,000 for a married couple) for the tax years 2023 and 2024, respectively. Charitable contributions, medical expenses, political campaign contributions, and gifts to your spouse are not considered taxable gifts.

Once a gift exceeds the annual exclusion for the year, the excess is applied to the lifetime estate tax exemption limitations. The lifetime gift limitation will increase from $12.92 to $13.61 million for individuals (or $25.84 to $27.22 million for married couples) from 2023 to 2024. The Gift Tax bracket ranges from 18-40% based on the excess gifted over the lifetime limitation. The lifetime limitation shields most individuals from having to pay a tax liability on a gift.

The Tax Cuts and Jobs Act of 2017 established the current Gift Tax lifetime limitations, which was effectively doubled. Without congressional action, the Gift Tax lifetime exemption will "sunset" on January 1, 2026 back to the 2017 limitations adjusted for inflation. The estimated Gift Tax lifetime exemption on January 1, 2026 will decrease to an estimated $7 million per individual. As a result of the decrease in the Gift Tax lifetime limitation, high net-worth individuals could owe up to a 40% Gift Tax liability in 2026.

Please reach out in order to prepare for the coming "sunset" in 2026. Planning now for the gift and estate tax "sunset" could save you millions of dollars.