Estate & Gift Tax Update

The IRS has announced the 2023 annual inflation adjustments impacting the estate, gift, and generation-skipping transfer taxes (in addition to many other tax provisions). These can be found in Revenue Procedure 2022-38, published on October 18, 2022.

Starting January 1, 2023, the estate and gift tax basic exclusion amount and the generation‑skipping transfer (“GST”) tax applicable to US persons are $12,920,000 (up from $12,060,000). This represents an increase of $860,000 per person or $1,720,000 for a married couple and may open up additional gifting opportunities for those whose prior gifts previously fully utilized their basic exclusion amount or GST exemption. However, it remains the case that the basic exclusion amount and GST tax exemption will fall roughly to 50% of their current levels (plus inflation) in 2026 if Congress doesn’t act to preserve the existing exemptions.

In 2023, the gift tax annual exclusion amount will be $17,000 per person in 2023 (up from $16,000 in 2022). Married couples can make gifts of community property of $34,000 to each recipient in 2023, or one spouse can give $34,000 of his or her separate property if the other spouse agrees to make an election to split that gift on a timely filed gift tax return filed by the donor-spouse.

The special annual exclusion for gifts to a spouse who is not a citizen of the United States increased from $164,000 in 2022 to $175,000 in 2023.

By Peggy Lennon