Federal Transfer Tax Exemptions
DEAR TRUST OFFICER:
What’s happening with the federal estate and gift tax?
—TAX TARGET
DEAR TAX TARGET:
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 $18,000 to $19,000. This is that amount that may be given to any one person without the need to file a federal gift tax return. 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 will be $13.99 million for those who die in 2025. Married couples each have an exempt amount, so together they can shelter $27.98 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 2025 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 schedule to fall roughly in half in 2026.
It’s much too soon to stop worrying about death taxes.
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