Gift and Estate Tax Exemptions to Rise in 2023

Gift and Estate Tax Exemptions to Rise in 2023

October 13, 2022

The phrase “tax deduction” often conjures images of wealthy people avoiding paying their fair share of taxes. The truth is, tax deductions are rules that taxpayers can, and should, use to reduce their tax liability.

In 2012, Congress passed the American Taxpayer Relief Act (the "Act"). Among other things, the Act increased the amount you can leave your heirs to $5 million, estate tax free (the “Credit”). The Act did not change the rules which allow you to leave your spouse an unlimited amount of money free of estate tax.

The Tax Cuts and Jobs Act of 2017 doubled the Credit, and the Credit has increased each year.

In 2023 the Credit increases to $12,920,000 for individual taxpayers and $25,840,000 for married couples. Of course, New York has different rules.

Likewise, the amount of the annual gifts you can give to beneficiaries is set to increase to $17,000 in 2023. This means you will be able to give $17,000 annually to an individual, estate and gift tax free. Better yet, married couples can double that amount and give away up to $34,000 to an individual, estate and gift tax free.

The Tax Cuts and Jobs Act of 2017 is set to sunset after December 31, 2025. Barring Congressional action, the Credit, namely the amount you can leave, estate tax free, to non-spousal beneficiaries will shrink to $5 million, indexed for inflation.

It is too early to tell what Congress might do before the end of 2025. In the meantime, the increase in both the gift and estate tax credits allows clients who have worked a lifetime and built a substantial estate, to take proactive steps to minimize potential estate tax liabilities and give more assets to their heirs.

The Trust and Estate Planning team at Gross Shuman PC has decades of experience assisting in the proper planning and execution of trust and estate documents. John F. Leone and his team are just a phone call away. Don’t leave your lifetime of work at risk. Call us today. 716-854-4300 ext. 243 or [email protected]