The Internal Revenue Service (IRS) has announced the annual inflation adjustments for tax year 2025.
A detailed breakdown of tax changes, deductions, and exemptions can be found here.
Some key points regrading the updated gift and estate tax exemptions:
GIFT TAX EXEMPTION
Effective January 1, 2025, an individual can make tax-free gifts of up to $19,000 per recipient (unlimited number of recipients) in the calendar year, an increase from $18,000.
A married couple can make tax-free gifts of up to $38,000 per recipient.
Gifting more than $19,000 per recipient in 2025 requires filing a gift tax return.
ESTATE TAX EXEMPTION
Similarly, the federal estate tax exemption has increased from $13,610,000 per individual in 2024 to $13,990,000 in 2025.
The meaning of this exemption is that a person can gift up to $13,990,000 and a couple up to $27,980,000 over the course of their lifetime without having to pay federal gift or estate tax.
Any exemption not used during a person's lifetime can be used against the estate tax at death.
On the same token, an estate inheritance worth up to these amounts is exempt from federal estate taxes (to the extent not used during lifetime).
Note that state estate tax is separate, and in NYS, has a lower exemption.
2026 WILL LIKELY BRING DRAMATIC CHANGES
The record-high 2025 exclusions are set to be cut roughly in half in 2026, so those wishing to make a bequest or gift, either directly or through a trust, should do so soon.
For any questions or concerns, contact us.
