The proverb goes that giving is more noble than taking. At Cotts Law, we understand that transferring assets to cherished ones during your lifetime is an excellent method for them to benefit from them immediately and for you to take pleasure in witnessing their improvement.
As a result of the Internal Revenue Service’s (IRS) unprecedented increase in the limits for annual gift exemption and estate tax exemption amounts, Americans will have more reasons to give in 2024.
Individuals who possess sizable estates ought to consistently contemplate lifetime gifting as a means to mitigate taxes through the utilization of the annual gift exemption, lifetime gift exemption, and estate tax exemption.
Annual Gift Tax Exclusion Has Increased
At this time, gifts of up to $17,000 per individual per year are exempt from taxation – for any number of people. This amount, known as the annual gift tax exclusion 2023, will increase to $18,000 in 2024. Married couples can each gift the individual amount, meaning that they can, if they choose, give $34,000 to any given individual this year and $36,000 in 2024 – again to any number of people, with no Gift Tax.
Lifetime Gift Tax Exemption
Furthermore, the IRS has announced that the lifetime exemption from estate and gift tax will be raised to $13.61 million by the year 2024. Any gift that surpasses the yearly threshold ($18,000 in 2024; $17,000 in the current year) does not inherently incur gift tax. Without deducting the difference from the individual’s lifetime exemption, no tax liability arises.
In the event that you purchased a vehicle for a friend for $20,000 out of extreme benevolence, you would surpass the yearly threshold of $17,000 for 2023 by $3,000 without incurring any further tax obligations. You would report the gift and deduct $3,000 from your lifetime exemption of $12.92 million for the current year by utilizing IRS Form 709. To account for such a gift in 2024, one would deduct $2,000 from the allotment of $13.61 million.
Giving to a Non-US Citizen Spouse
According to the legal professionals at Morgan Lewis, gifts between two American spouses are virtually unlimited (a couple has $25.84 million in estate tax exemptions, and going over this limit will only be taxed at the death of the surviving spouse).
But gifts to non-U.S. citizens, regardless of whether they are U.S. residents, fall under different confines and are subject to an annual gift exemption. For 2024, the annual amount that one may give to a spouse who is not a U.S. citizen will increase to $185,000 in 2024, up from $175,000 for this year.
“Act Now to Preserve Your Tax Exemption Benefits”
Barring an extension or new legislation, the lifetime estate and gift tax exemption is due to revert to the pre-2017 Tax Cuts and Jobs Act level of $5.49 million at midnight on Dec. 31, 2025. So, it’s essential to address your gift-giving plans now so that you and your most cherished one can take advantage of not only the money while both parties are living but also of the tax exemptions that come with giving. Contact our office today at (361) 866-3819 or visit www.cottslaw.com for a free, no-obligation consultation, and let us deal with the IRS for you.
