The old adage suggests it’s better to give than to receive, especially when giving assets to your loved ones while you’re still around. This allows them to benefit immediately, offering you the joy of witnessing their lives enriched. In 2024, Americans will have more reasons to give, because the Internal Revenue Service (IRS) has upped the limits for gift, estate tax exemption amounts, and Estate Tax Exemption Limit to their highest exclusion amounts ever.
Estate Tax Exemption Limit 2024
The Internal Revenue Service (IRS) has increased the limits for gift and estate tax exemption amounts in 2024, providing Americans with more reasons to give. These enhanced exclusion amounts mark a significant uptick in available exemptions.
Annual Gift Tax Exclusion Has Increased
Presently, individuals can gift up to $17,000 to any number of people annually without incurring taxation. Starting in 2024, this limit will rise to $18,000. For married couples, jointly giving up to $36,000 to beneficiaries will be possible without tax implications.
Lifetime Gift Tax Exemption
Additionally, the IRS has announced that the lifetime estate and gift tax exemption will increase to $13.61 million in 2024. If a gift exceeds the annual limit ($17,000 this year, $18,000 in 2024), that does not automatically prompt a gift tax. The difference is simply taken from the person’s lifetime exemption limit and no taxes are owed.
For example, if you were extraordinarily generous and bought your friend a car for $20,000, you would exceed the annual limit of $17,000 for 2023 by $3,000 but you wouldn’t owe additional taxes. By using the IRS Form 709, you would report the gift and deduct $3,000 from your lifetime exemption of $12.92 million for this year. If you were planning on such a gift in 2024, you would subtract $2,000 from your $13.61 million limit.
Giving to a Non-US Citizen Spouse
According to the legal professionals at Morgan Lewis, gifts between two American spouses are virtually unlimited (a couple has $25.84 million in estate tax exemptions and going over this limit will only be taxed at death of the surviving spouse). But gifts to a non-U.S. citizen, regardless of if they are a U.S. resident, fall under different confines and are subject to an annual tax exclusion amount. For 2024, the annual amount that one may give to a spouse who is not a US citizen will increase to $185,000 in 2024, up from $175,000 for this year.
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Barring an extension or new legislation, the lifetime Estate Tax Exemption Limit is due to revert to the pre-2017 Tax Cuts and Jobs Act level of $5.49 million at midnight on Dec. 31, 2025. So, it’s important to address your gift-giving plans now, so that you and your most cherished can not only take advantage of the money while both parties are living, but also of the tax exemptions that come with giving.
