IRS Announces 2025 Inflation Adjustments to Estate, Gift and Generation-Skipping Tax Exemptions
Client Alerts | October 25, 2024 | Estate Planning and Administration
The IRS recently released Revenue Procedure 2024-40, which announced 2025 annual inflation adjustments for various tax provisions.
Effective January 1, 2025, the estate and gift tax basic exclusion amount and the generation skipping transfer (“GST”) tax exemption are scheduled to increase from $13,610,000 to $13,990,000. This is an increase of $380,000 per person or $760,000 for a married couple. Individuals who previously used their entire basic exclusion amount (or GST tax exemption) can utilize these inflation adjustments to make additional gifts in 2025. Please note, however, that absent any legislative action to extend provisions of the 2017 Tax Cuts and Jobs Act (“TCJA”), the basic exclusion amount and GST tax exemption are scheduled to revert to approximately 50% of their current levels (plus inflation) in 2026. Since it remains unclear how Congress will address the expiring provisions of the TCJA, there is an expectation that a substantial number of taxpayers will make large gifts in 2025 to fully utilize the basic exclusion amount and GST tax exemption that may otherwise be eliminated in 2026. Therefore, the best practice is to plan and execute any large gifts as early as possible in 2025 to allow sufficient time for any administrative work required for such gifts, such as drafting new trusts or engaging appraisers to value certain gifted assets.
The gift tax annual exclusion amount is set to increase from $18,000 per person in 2024 to $19,000 per person in 2025. Married couples can choose to “split” gifts, which would allow one spouse to make gifts of up to $38,000 to each recipient in 2025.
In addition to the above, the annual exclusion for gifts to a spouse who is not a citizen of the United States will increase from $185,000 to $190,000 in 2025.
To discuss techniques that may be appropriate to help you reach your individual planning goals, please contact any member of Kleinberg Kaplan’s Trusts & Estates Practice Group.