IRS Increases Annual Gift and Estate Tax Exclusions in 2023

Although inflation is generally nothing to be pleased about, the IRS recently announced inflation-adjusted increases to the annual gift tax exclusion amount and the unified gift and estate tax exemption amounts for 2023.

What is the Annual Gift Tax Exclusion for 2023?

Effective January 1, 2023, the gift tax annual exclusion amount will increase from $16,000 (2022 number) to $17,000 per donee. This means you can gift this amount to as many people as you wish in 2023 without using up your gift and estate tax exemption amounts or paying gift tax. Married couples who gift-split may gift a combined $34,000 per donee in 2023 without making a taxable gift.

What is the Unified Gift and Estate Tax Exemption Amount for 2023?

Another significant change, effective January 1, 2023, is an increase in the unified gift and estate tax exemption amount; the 2022 exemption amount of $12.06 million will increase to $12.92 million per individual. With portability, this means a combined $25.84 million exemption amount for a married couple. The combined gift and estate tax exemption is the total amount of gifts a person may make during their lifetime and at death before being on the hook for gift or estate tax.

Future Changes

As a reminder, under current law, these amounts are scheduled to revert to much lower amounts after December 31, 2025 if Congress does not extend or make the current law permanent. 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 additional questions regarding the exemption or would like to discuss planning strategies, reach out to schedule a meeting.