Increased Gift and Estate Tax Exemption Amounts for 2025

The US Internal Revenue Service recently announced that the annual gift tax exclusion is increasing in 2025 due to inflation. The annual gift tax exclusion will be $19,000 per recipient for 2025. In addition, the estate and gift tax exemption will be $13.99 million per individual for 2025 gifts and deaths, up from $13.61 million in 2024. This increase means that with planning a married couple can shield a total of $27.98 million without having to pay any federal estate or gift tax.

2025 ANNUAL GIFT TAX EXCLUSION

Each year, the IRS sets the annual gift tax exclusion, which allows an individual to give a certain amount (in 2025, $19,000) per recipient tax-free without using up any of the individual’s lifetime gift and estate tax exemption (in 2025, $13.99 million). For married couples, this means that they can give $38,000/year per recipient beginning next year.

For example, if a married couple has two children and four grandchildren, they may transfer $228,000 in 2025 to their descendants without touching their combined $27.98 million gift tax exemption, thus allowing them to transfer further substantial assets gift tax-free. Not only are the assets removed from the taxpayers’ taxable estates, the assets’ future appreciation also avoids gift and estate taxes.

2025 LIFETIME ESTATE AND GIFT TAX EXEMPTION

If an individual gifts an amount that is above the annual gift tax exclusion, a portion of the individual’s lifetime gift tax exemption ($13.99 million in 2025) will be used. The gift and estate tax exemption are combined, meaning that the use of one’s gift tax exemption will reduce the amount one may leave at death estate tax-free.

**It should be noted that under current law, the estate and gift tax exemption amount will be decreased about 50% at the start of 2026 when the current law (Tax Cuts and Jobs Act of 2017) is set to expire. Stay tuned – Congress may enact new legislation which will impact the estate and gift tax rules.

Whether your existing estate plan was created recently or some years ago, you may want to have a conversation with your financial advisor, tax professional, and estate planning attorney to make the best educated decisions about your family’s future. If it has been a while since you had your estate plan reviewed now is the perfect time. Don’t delay as estate planning can take time and if you wish to make year-end gifts time is running out for 2024.

Call our office at 480-922-1010 or email info@bivenslaw.com to schedule your complimentary estate plan review consultation. We are here to help you plan your best legacy.