IRS Increases Gift and Estate Tax Exemption Limits for 2024, Encouraging Generosity among Americans
In a move aimed at incentivizing charitable giving and reducing tax burdens, the Internal Revenue Service (IRS) has announced an increase in the gift and estate tax exemption limits for 2024. These new limits mark the highest exclusion amounts ever set by the IRS, providing Americans with more reasons to give and support their loved ones.
For individuals with substantial estates, lifetime gifting has long been considered a strategic option to minimize taxes by utilizing annual gift and lifetime gift and estate tax exemptions. Currently, individuals can give up to $17,000 to any number of people in a single year without incurring any taxation. However, from 2024 onwards, this limit will be raised to $18,000, offering individuals even greater flexibility in aiding their beneficiaries. Married couples will also benefit, as they can collectively gift up to $36,000 to their loved ones without any tax implications.
Moreover, the lifetime estate and gift tax exemption will see a significant increase, reaching $13.61 million in 2024. It is important to note that exceeding the annual gift limit (currently $17,000) does not automatically trigger a gift tax. Instead, any excess amount is deducted from the individual’s lifetime exemption limit, eliminating the need for immediate taxes.
For instance, let’s say you decide to gift a car worth $20,000 to a friend. In 2023, this surpasses the annual limit by $3,000. However, you won’t owe additional taxes due to the exceeding amount. By utilizing the IRS Form 709, you can report the gift and deduct $3,000 from your lifetime exemption, which is $12.92 million for this year. If you plan to make a similar gift in 2024, you would deduct $2,000 from the increased $13.61 million limit.
Gifts between American spouses remain practically unlimited, with couples enjoying a combined estate tax exemption of $25.84 million. Only when this limit is surpassed will taxes be imposed upon the surviving spouse’s death. However, gifts to non-U.S. citizens, even if they are U.S. residents, have different conditions and fall under an annual tax exclusion amount. From 2024, the maximum annual gift to a non-U.S. citizen spouse will increase to $185,000, up from $175,000 this year.
It is crucial to note that unless extended or amended, the lifetime estate and gift tax exemption will revert to the pre-2017 Tax Cuts and Jobs Act level of $5.49 million by the end of 2025. Therefore, it is advisable to consider gift-giving plans now to take advantage of both the funds and tax exemptions while both parties are alive.
In conclusion, the increased gift and estate tax exemption limits for 2024 present Americans with an excellent opportunity to make generous contributions and provide immediate benefits to their loved ones. By strategically utilizing these limits, individuals can navigate the tax landscape more effectively and enhance their beneficiaries’ lives. As the year approaches, it is essential to evaluate and plan gift-giving accordingly, ensuring that both financial security and tax advantages are maximized.