IRS Announces 2025 Gift and Estate Tax Exemptions

The Internal Revenue Service (IRS) has released its tax inflation adjustment figures for the tax year 2025. Here’s what you need to know about changes to gift and estate tax limits.

Annual Gift Tax Exclusion Increases to $19,000

Starting January 1, 2025, individuals can give up to $19,000 per person, per year, tax-free. This is an increase from the $18,000 limit in 2024.

• If you give more than $19,000 to any individual in 2025, you may need to file a gift tax return.

• For married couples filing jointly, the annual gift tax exclusion doubles to $38,000.

Estate Tax Exemption Rises to Nearly $14 Million

The federal estate tax exemption for 2025 will increase to $13,990,000 per individual, up from $13,610,000 in 2024. For married couples, the exemption doubles to $27,980,000.

• You can give away up to $13,990,000 over your lifetime before owing federal gift tax.

• Estates valued below this threshold will not owe federal estate taxes.

• Note: State estate tax laws vary depending on where you live and are separate from federal taxes.

What Happens After 2025? The Tax Cuts and Jobs Act (TCJA) Sunset

The TCJA provisions are set to expire at the end of 2025 unless Congress acts. This expiration will:

• Lower federal estate and gift tax exemptions to approximately $5 million (adjusted for inflation) , about half the current limits.

• Potentially increase the number of estates subject to taxation and raise future tax bills.

Planning Ahead: Work With an Estate Planning Professional

Given the upcoming changes, it’s wise to partner with an experienced estate planning attorney now. Early planning can help you:

• Strategize around current exemption amounts.

• Minimize future tax liabilities.

• Take advantage of existing tax benefits before potential sunset.