As we are already more than halfway through January, there is no better time than the present to start planning your gifting for 2024. The inflation-adjusted gift and estate tax basic exclusion amount (BEA) was released for 2024, and the BEA amount has increased to $13.61 million (up from 2023’s amount of $12.92 million). Those who are married can gift up to $27.22 million without any gift tax liability. Therefore, if you already used up your $12.92 million last year because you were generous this past holiday season, you now have an additional $690,000 per donor, or $1,380,000 per married couple, to gift.
Along with the increase in the BEA, the annual exclusion amount has also increased to $18,000 per donor ($36,000 for donors who are married). There is no limit on the number of donees that donors can gift to in a year. If gifts during 2024 do exceed the annual exclusion amount of $18,000, there is no need to worry, as the BEA will then begin to be reduced.
It is important to note that not all gifts are treated the same. Payments that are made directly to a school (payment of tuition) or directly to a medical facility (medical costs), no matter the amount, are completely excluded for purposes of the annual exclusion as well as the BEA. Keep in mind that it does not need to be made on behalf of a family member; you can also make the payments on behalf of a friend.
The adage “a dollar today is worth more than a dollar tomorrow” means it can be in your best interest to begin moving assets out of your estate sooner rather than later. The start of 2024 also means taxpayers only have two more years of the advantageous increased BEA. In 2026, the increased BEA is scheduled to revert to pre–Tax Cuts and Jobs Act (TCJA) levels of about $5 million per individual adjusted for inflation (pending additional legislation). This means that current amounts could be cut in half.
Please get in touch with your WG tax advisor if you have any questions or would like more clarity on this subject.