Gift Tax Exemption Amount for the Year 2025
In the realm of financial planning, it's essential to stay informed about changes in estate and gift tax regulations. Here's a summary of the key updates for 2025, as well as some insights into the following years.
As of 2025, the lifetime estate and gift tax exemption for individuals has increased from $13.61 million to $13.99 million. For married couples, this combined limit is now $38,000 per recipient, a rise of $2,000 from the previous year's amount of $36,000.
The annual gift tax exclusion or limit, which is subject to yearly inflation adjustments, stands at $19,000 per recipient in 2025, marking an increase of $1,000 from the 2024 limit of $18,000. This means an individual can give up to $19,000 tax-free to each person without triggering gift tax reporting.
It's important to note that gifts given in 2026 or beyond will benefit from the new expansion of the exemption, as the lifetime estate and gift tax exemption under the newly enacted OBBB increases to $15 million, adjusted for inflation starting January 1, 2026. This allows a married couple to shield up to $27.98 million from federal estate and gift taxes.
Gifts made before 2026 will benefit from the already-high 2017 tax exemption. Additionally, the annual gift tax limit for 2026 remains at $17,000 per recipient, providing a valuable opportunity for tax-efficient gifting.
Remember, the gift tax is a federal tax that applies to gifts made throughout the year, with a range of 18% to 40%. If you exceed the annual gift tax limit, you may have to file a federal gift tax return (IRS Form 7009). The giver typically pays the gift tax, but in some circumstances, the recipient or the estate could be responsible.
Gifts are not just limited to cash transactions. The gift tax applies to a wide range of assets, including real estate, vehicles, forgiven debts, insurance policy benefits, and stock transfers. For tax purposes, the gift amount is the item's "fair market value" at the time of the gift.
It's worth mentioning that the annual limit is time-sensitive. To take advantage of the 2025 limit, you need to make your gifts by Dec. 31, 2025. Staying under these limits per recipient exempts you from filing a gift tax return for the year.
In conclusion, understanding the changes in estate and gift tax exemptions and annual limits can help you make informed decisions about your financial planning. Always consult with a tax professional to ensure you're making the most of these opportunities.
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