The IRS released the 2025 annual inflation adjustments for various tax provisions.
Effective January 1, 2025, the estate and gift tax exclusion amount and the generation skipping transfer (“GST”) tax exemption are scheduled to increase from $13,610,000 to $13,990,000.
This is an increase of $380,000 per person or $760,000 for a married couple.
Individuals who previously used their entire basic exclusion amount (or GST tax exemption) can use the inflation adjustments to make additional gifts in 2025.
Depending on the results of the 2024 election, without legislative action to the 2017 Tax Cuts and Job Act, the exclusion amount and GST tax exemption are to revert to 50% of their current levels plus in 2026. Without Congress addressing the provisions, it is recommended that if you would like to make a large gift, now is the time to do so. You must give time to estate planners to draft new trusts, perform the administrative work and engage appraisers to value assets.
The gift tax annual exclusion amount is set to increase from $18,000 per person in 2024 to $19,000 per person in 2025. Married couples can choose to “split” gifts, which would allow one spouse to make gifts of up to $38,000 to each recipient in 2025.
The annual exclusion for gifts to a spouse who is not a citizen of the United States will increase from $185,000 to $190,000 in 2025.
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