There are two taxes that will specifically affect estate planning that you should be aware of: estate taxes and gift taxes. The IRS regulations for these two types of taxes can be complex. For example, there are limits and exclusions you may be able to take advantage of—if you know they exist. The rules also change, sometimes yearly. As you work on your estate plans, it’s important to understand the upcoming 2025 estate tax and gift tax limits.
What are the 2025 estate tax and gift tax limits?
The federal estate tax exemption is the amount below which your estate will not be subject to taxes when you die. This amount will go up again for 2025, as it is adjusted annually for inflation. For people who pass away in 2025, the exemption amount will be $13.99 million (it is $13.61 million in 2024). A married couple will have a combined exemption for 2025 of $27.98 million ($27.22 million for 2024).
In 2025, the annual gift tax exclusion will be $19,000. This means you can give up to $19,000 to as many individuals as you want without having to pay gift taxes. But what if you want to give someone $30,000 without paying taxes? You may elect to use your lifetime gift tax exemption to cover that additional $11,000. However, using your lifetime gift tax exemption will typically reduce your estate tax exemption.
Do you have questions about coordinating your estate plan with your IRS tax exclusions? You can schedule an appointment with me by calling (480) 719-7333.