The gift tax limit for 2024

The gift tax limit for 2024

January 31, 2024

Following a conversation with a new potential client, a certain questions arose that I believe might be common among others. Therefore, I decided to create a brief blog post after consulting with my resources. While I may not have answers to every question, I possess a substantial toolbox of a reliable support team, enabling me to connect individuals with the right expertise.

This awareness is vital for successful estate and gift tax planning, and I encourage individuals to seek advice from tax professionals to ensure compliance and accuracy.

The gift tax limit for 2024 stands at $18,000, marking the maximum amount individuals can give without incurring taxes. Unfortunately, it is now too late to make a gift for the year 2023. Additionally, there exists a noteworthy lifetime gift limit of $13.6 million.

Exploring the Annual Gift Tax Exclusion, the IRS permits individuals to give a specific amount of assets or property annually without incurring taxes. In 2024, the annual gift tax exclusion is $18,000. This implies that an individual can gift up to $18,000 to as many recipients as desired without facing tax consequences. For example, a grandfather could distribute $18,000 to each of his 10 grandchildren in a given year, all without triggering gift taxes. In contrast, the 2023 gift tax exemption was set at $17,000.

Consider a scenario where the same grandfather opts to give each grandchild $22,000, surpassing the 2024 annual exclusion limit by $4,000 per gift. While this could potentially lead to gift taxes on the $40,000 overage, it is not an automatic consequence.

For married couples, each spouse is eligible to give away $18,000 tax-free in 2024. Consequently, a married couple like Cynthia and Joe could jointly provide up to $36,000 to each of their three nieces and nephews annually.

Turning to the Lifetime IRS Gift Tax Exemption*, exceeding the $18,000 limit for 2024 does not automatically trigger the gift tax. In the same year, the IRS allows individuals to give away up to $13.61 million in assets or property over their lifetime and/or as part of their estate. If a gift exceeds the annual exclusion limit, the excess amount is deducted from the person’s lifetime exemption limit, resulting in no immediate tax obligations.

To illustrate, let's consider a scenario for the 2024 tax year: A woman decides to purchase her granddaughter a $30,000 car as a college graduation present. While this technically exceeds the $18,000 exclusion limit by $12,000, the woman wouldn’t owe additional taxes. Reporting the gift to the IRS using Form 709 allows her to deduct $12,000 from her $13.61 million lifetime exemption. Consequently, she remains eligible to give away up to $13,598,000 tax-free.

In summary, a person’s lifetime exemption limit applies to gifts given while alive and property left to heirs after death. This understanding is crucial for effective estate and gift tax planning, and individuals are encouraged to seek guidance from tax professionals for compliance and accuracy.


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