Perhaps there is one positive effect of inflation as we consider the incoming 5.8% increase to the annual gift tax exclusion in 2024. That is correct, for the 3rd year in a row, we will be seeing a $1,000 boost for the annual gift tax exclusion from $17,000 in 2023 to $18,000 in 2024. This big boost provides additional ways for individuals to share wealth with their loved ones.
In layman’s terms, what does this mean for you and your family? The annual gift tax exclusion is an amount that one may gift to a recipient completely tax-free. In 2024, you could gift any number of different recipients up to $18,000 total without tax repercussions or decreasing your lifetime gift and estate tax exemptions. Additionally, if you are married you and your spouse may each gift up to the $18,000 limit.
This is the third year in a row that we will see a $1,000 gift tax exclusion increase following a few years of relative stagnation. See the table below from the IRS website.
Year of Gift
Annual Exclusion per Donee
2011 through 2012
$13,000
2013 through 2017
$14,000
2018 through 2021
$15,000
2022
$16,000
2023
$17,000
2024
$18,000
Gifting something above the new annual $18,000 exemption limit will likely result in the overage applying to lifetime gift limits.
Gifting an asset does not raise the new owner’s basis in the asset. This is referred to as “Carryover Basis”.
A married couple each have their own $18,000 limit, and so they can together donate a total of $36,000.
Gifting assets over time may help you and your loved ones avoid or limit estate taxes at a future date.
How does this increase in the 2024 annual gift tax limit change your wealth planning? This boost allows a married couple to gift up to $36,000 of cash or assets per donee without reducing your future lifetime gift and estate tax exemptions. A married couple with two kids and four grandchildren could distribute up to $216,000 ($36,000 to each) without incurring any tax. This, in combination with the increase in 2024’s estate tax exemption, provides individuals with a powerful tool to transfer wealth to loved ones without paying taxes through the nose.
