As of January 2023, the annual gift tax exclusion amount has increased to $17,000. That is the amount you can gift to any one person each year free of any tax implications. For years the amount was set at $10,000, but since 2002 it has been slowly increasing.
Making annual exclusion gifts allows you to move money to family members and friends so that it is out of your taxable estate with no estate or gift tax consequences. If you make a gift in excess of $17,000, you will need to use up your lifetime exemption amount on the overage. The federal lifetime exemption amount is $12,920,000 as of 2023, but will be dropping to $5 million in 2026, adjusted for inflation. Given the changes ahead, it is a good time to start thinking about ways to increase the monies you can gift to the next generation free of taxes.
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