The Internal Revenue Service (IRS) recently announced key gift and estate tax thresholds for the 2023 tax year. Because the IRS adjusts these threshold amounts annually for inflation, it may come as no surprise that amounts will rise in the upcoming year.
The lifetime gift and estate tax exemption will increase by $860,000 to $12,920,000 per person. The annual gift tax exclusion amount will also increase to $17,000 in 2023, with some exceptions. These exceptions detail that gifts can be made up to $17,000 to, or for the benefit of, an unlimited number of individuals next year without using the lifetime gift and estate tax exemption. If married, an individual and their spouse can split and make gifts of up to $34,000 to an unlimited number of individuals in 2023 without applying the lifetime gift and estate tax exemptions.
Finally, the annual exclusion for gifts to non-U.S. citizen spouses will increase to $175,000 in 2023. Unlike gifts between spouses who are both U.S. citizens, which are generally unlimited, a spouse usually cannot give more than this annual exclusion amount to a non-U.S. citizen spouse without incurring a tax liability.
These threshold amounts will become operative for gift and estate tax purposes on Jan. 1, 2023. Gift and estate tax planning and issues can be very complicated and specific rules can apply based on specific circumstances.
If you have questions about how these new thresholds may affect gifting or estate planning, Taft's team is happy to discuss them.