Attorney Brittany Hinojosa Citron Discusses The Gift Tax for our Smart Counsel for Lunch Series. Please watch and if you have any questions or want to learn more please call us at 781 461-1020.
Gift Tax Exclusion
Important Numbers for 2024 Estate Tax Planning
Important Numbers for 2024 Estate Tax Planning
Each year around this time, the IRS comes out with the inflation adjusted federal Estate and Gift Tax exemption amounts for the following calendar year. Here are the numbers for 2024.
2024 Federal Estate Tax Exemption
The federal estate tax exemption is the amount that each person is permitted to pass on free of any federal estate tax. For 2024, this amount is $13.61 million per person (up from $12.92 million in 2023) which translates into $27.22 million for a married couple.
2024 Annual Gift Tax Exclusion
The Annual Gift Tax Exclusion amount is the amount that a person may gift to any number of other individuals during a calendar year without impacting the donor’s Lifetime Gift Tax exclusion. For 2024, this amount will be $18,000 per person. For example, a grandparent may give each of his or her five grandchildren $18,000 for a total of $90,000 during 2024 without needing to file a gift tax return (form 709) reporting the gifts and without any impact on the donor’s Lifetime Gift Tax exclusion.
2024 Lifetime Gift Tax Exclusion
In addition to the Annual Gift Tax Exclusion, each person has a Lifetime Gift Tax exclusion which is currently equal to the federal estate tax exemption – $13.61 million for 2024. If gifts in excess of a person’s Lifetime Exclusion amount are made, tax on the excess gifts is payable by the donor (person making the gift) at the rate of 40%. To the extent a person makes gifts over and above the Annual Gift Tax Exclusion amount, their Lifetime Gift Tax exclusion amount is reduced
2024 Gifts to Spouses
Amounts passing to a U.S. citizen spouse either at the death of the first spouse or during lifetime in the form of gifts, pass free of federal and Massachusetts estate tax regardless of the amount.
The same does not apply for non-U.S. citizen spouses. When one spouse dies leaving assets to a surviving non-U.S. citizen spouse, there is no marital deduction permitted for those assets. Since the deceased spouse may leave $13.61 million free of federal estate tax, the lack of a marital deduction does not matter for many people.
Lifetime gifts to a non-U.S. citizen spouse are limited to $185,000 (2024) per calendar year.
What about Massachusetts?
Massachusetts has its own estate tax system which until very recently had a $1 million threshold for taxable estates. As of October 4, 2023, we have a $2 million exemption and this is effective for estates of decedents dying on or after January 1, 2023. This amount is not indexed for inflation so it will take another act of the Massachusetts legislature to increase it. But still, we are grateful for the bump up to $2 million ($4 million for a married couple who undertake estate tax planning).
Keep in mind that Massachusetts does not have a gift tax. As such, there is no limit on the amount you may give away under Massachusetts tax law.
If you are interested in discussing estate tax planning or creating a gifting plan, please contact our office to schedule a time to meet with one of our attorneys.
Attorney Suzanne R. Sayward is a partner with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
November, 2023
© 2023 Samuel, Sayward & Baler LLC
‘Tis the Season for Gifting
The end of the year is often a time when people think about making gifts to loved ones for the holidays or for year-end tax planning. Since we are in December, what better time to talk about the Gift Tax?
Here are a few things to know about the gift tax.
- Since there is no gift tax in Massachusetts, residents of the commonwealth need only be concerned about the federal gift tax.
- There are two ‘exemptions’ or ‘freebies’ under the federal gift tax law:
- The Annual Gift Tax Exclusion is the amount that each person may gift to any number of other individuals without any impact on the giver’s Lifetime Gift Tax Exemption. In 2022, the Annual Gift Tax Exclusion amount is $16,000. As of January 1, 2023, the Annual Gift Tax Exclusion amount will be $17,000. Gifts to any one person in a calendar year in excess of the Annual Gift Tax Exclusion amount will reduce the giver’s Lifetime Gift Tax Exemption by the amount in excess of the Annual Exclusion.
- In addition to the Annual Gift Tax Exclusion, each person has a Lifetime Gift Tax Exemption. This Lifetime Exemption is the amount that each person may gift over and above the annual exclusion gifts. In 2022, the Lifetime Exemption is $12,060,000. As of January 1, 2023, the Lifetime Gift Tax Exemption will be $12.9 million.
- There is no limit on the amount you may give to your U.S. citizen spouse free of any federal gift tax. There is an annual exclusion limitation for gifts to non-U.S. citizen spouses. This amount is $164,000 in 2022 and $175,000 in 2023.
- There is no limit on the amount you may pay on behalf of any individual for tuition or medical expenses, provided these payments are made directly to the educational or medical institution.
- There is no gift tax payable on gifts to qualified charities.
The gift tax is not the only tax to take into consideration when thinking about making large gifts; there may be income tax, estate tax, and capital gain tax consequences. And of course, taxes are not the only concern when making large gifts – there may be long-term care ramifications, concerns about a recipient’s ability to handle a large sum, and worries about potential threats to the gift by the recipient’s creditors (divorcing spouse, failed business, lawsuit, etc.). If you are considering making large gifts to family members, talk with your estate plan attorney to make sure you have a good understanding of all of the consequences.
Attorney Suzanne R. Sayward is a partner with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
December, 2022
© 2022 Samuel, Sayward & Baler LLC