Earlier this week, the U.S. Internal Revenue Service released Rev. Proc. 2024-40 which lists 2025 inflation adjustments for estate tax purposes.
- The annual gift tax exclusion for 2025 will be increasing to $19,000 – an increase from $18,000 in 2024.
- In addition, the estate and lifetime gift tax exemption will be increasing to $13.99 million per individual for 2025 – an increase from $13.61 million in 2024. This exemption represents the amount of a decedent's estate (including previously taxable gifts) that is exempt from estate tax.
Important Considerations Regarding the Estate and Lifetime Gift Tax Exemption
The Tax Cuts and Jobs Act of 2017 provided changes to the Internal Revenue Code which increased the gift tax exemption amounts in effect from 2018 to 2025. It is important to note that on January 1, 2026, the estate and lifetime gift tax exemption is scheduled to sunset, bringing the exemption amount down to an expected approximate amount of $7 million if Congress does not act prior to that time.
There are various planning opportunities to consider before the estate and gift tax exemption is scheduled to sunset. These opportunities include, but are not limited to, outright lifetime gifts, spousal lifetime access trusts and certain other irrevocable trusts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.