Each year changes occur in the Federal Estate Tax Exemption and Gift Tax Exemption amounts. Effective January 1, 2024, the federal estate tax exemption will increase to $13.61 million. (In 2023, it was $12.92 million.) Married couples are permitted to combine this amount for a total $27.22 million exemption.
The federal estate tax, as it presently stands, only affects a small portion of the population. If you are someone who will die with an estate larger than $13.61 million, as of the year of your death, federal estate tax would only be due on the amount exceeding the exemption. For the rest of us, who have estates valued under $13.61 million, this means no federal estate tax.
More applicable to many of us is the amount you are permitted to gift to an individual on an annual basis. This is called the gift tax exemption amount. On January 1, 2024, the gift tax exemption amount increased to $18,000. (In 2023, it was $17,000.) A married couple, filing jointly, can combine this amount to a $36,000 gift tax exemption per individual. If a person gifts more than the annual gift tax exemption amount, they need to report the gift to the IRS by filing a gift tax return. While this does not necessarily result in the imposition of the tax, the gift tax return still must be filed. Individuals have a lifetime gift exemption amount, which is the same amount as the federal estate tax exemption amount – $13.61 million. This means an individual can gift up to the lifetime gift exemption amount over the course of his lifetime before he would trigger a tax.