Federal Transfer Tax Exemptions
The amounts exempt from federal estate and gift taxes goes up again next year, to account for inflation. The gift tax annual exclusion rises from $17,000 to $18,000. This is that amount that may be given to any one person without the need to file a federal gift tax. There is no limit to the number of annual exclusion gifts that may be made in a year, but the exclusion expires every year. Use it or lose it.
The amount exempt from federal estate tax is $12.92 million for estates of those who died in 2023, and will be $13.61 million for those who die in 2024. Married couples each have an exempt amount, so together they can shelter $27.22 million from federal estate tax if they both die next year. The exemption may also be used for transfers by gift that exceed the annual exclusion amount.
That exemption amount will excuse the vast majority of 2024 estates from worrying about the federal estate tax. Two important caveats apply, however. Those states that still have death taxes (the term includes estate taxes and inheritance taxes; some states have both) typically impose them at much lower wealth levels. Second, under current law the amount exempt from federal estate tax is scheduled to fall roughly in half in 2026.
It’s much too soon to stop worrying about death taxes.
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