2024 IRS Gift and Estate Tax Changes

As the year 2023 draws to a close, the landscape of financial planning is undergoing a significant transformation due to the Internal Revenue Service’s (IRS) recent updates to the gift and estate tax exemption limits. Understanding the 2024 IRS Gift and Estate Tax changes is pivotal for individuals and families engaged in estate planning and wealth transfer strategies. This blog will discuss some of the implications these changes present, how they may affect your financial planning, and why proactive action may be warranted to ensure your fiscal well-being.

Expanded Annual Gift Tax Exclusion: Generosity Takes Center Stage
A notable change is the increase in the annual gift tax exclusion. Starting in 2024, individuals can gift up to $18,000, up from the current $17,000 limit, without either party incurring taxes. For married couples, the combined exclusion rises to $36,000 per beneficiary before incurring any tax liabilities. This adjustment opens new avenues for gifting strategies, allowing individuals to support family members or friends a bit more generously without facing tax consequences. The enhanced limit is advantageous for those seeking to reduce the size of their taxable estates while providing for loved ones.

Substantial Increase in Lifetime Gift Tax Exemption: A Strategic Leap
The lifetime estate and gift tax exemption is poised for a substantial increase to $13.61 million for individuals, and $27.22 million for married couples in 2024. A sizable 5.34% increase over the 2023 limits of $12.92 and $25.84 million respectively. This exemption holds immense value for individuals with substantial estates, offering a strategic pathway to mitigate estate taxes. If your 2024 gifting amounts exceed the annual $18,000 limit, your overall lifetime exemption amount would decrease proportionally without triggering immediate taxes. For instance, gifting $25,000 in 2024 would only utilize $7,000 of the overall lifetime exemption. Understanding the tax implications involved in financial planning is essential for those seeking to preserve and spread accumulated wealth across generations.

Navigating Gifts to Non-U.S. Citizen Spouses: Understanding the Nuances
When considering gifts to non-U.S. citizen spouses, even if the spouse is a US resident, the IRS imposes a giving limit. To avoid taxation in 2024, the annual tax exclusion limit for gifts to non-U.S. citizen spouse will increase to $185,000, a notable increase from the current 2023 limit of $175,000. Gifts between U.S. citizen spouses have a lifetime estate tax exemption of $25.84 million.

The Future of Exemption Limits: A Call for Proactive Planning
While these changes present significant opportunities, it is important to note they are temporary! The current increases are set to expire at the end of 2025, with lifetime exemption limits reverting to the pre-2017 level of $5.49 million, barring any legislative changes. This impending reversion underscores the importance of proactive financial planning to fully capitalize on the expanded exemption limits.

The Bottom Line: Seize the Opportunity
The upcoming 2024 changes to the IRS gift and estate tax exemption limits present a unique window of opportunity for strategic financial planning. By acting promptly, you can effectively reduce taxable estates, support loved ones through wealth transfer, and lay the groundwork for secure financial futures.

RJS LAW: Your Partner in Financial Planning
At RJS LAW, our team of financial planning experts is committed to helping you navigate the ever-evolving IRS gift and estate tax landscape. Our approach starts with understanding each client’s unique financial situation and goals, then crafting strategies to optimize wealth management and transfer. Whether you are seeking to maximize your gifting options, navigate cross-border financial complexities, or future-proof your estate against potential tax changes, our experts are here to assist in reviewing, updating, and/or creating plans to fit your desires.

The time to act is now. Contact RJS LAW today at 619-595-1655 or on the web at RJS LAW to schedule a free consultation with our financial planning experts to optimize your financial future.

Written by Devon J. Arabo, Esq., LL.M.