Gift Exclusion up to $18k for 2024 for an individual, $36k for a couple. The gift exclusion confuses many taxpayers - and that’s because they don’t understand the interplay of the estate tax with it.
The estate tax (at the federal level, state estate tax thresholds vary) is currently set at $12.92M for an individual and $25.84M for a couple. When you pass away, the value of your estate above those amounts is taxed federally anywhere from 18-40%.
Now, while you’re alive, any gifts you make above the gift exclusion threshold, get counted against your estate tax exemption.
That means if I gave away $118k next year to someone (a single individual), I would have to report $100k of that to the federal government with my tax filing as a reduction of my estate tax threshold. Now instead of my estate tax threshold being at $12.92M, it’s $12.82M when I die.
But, if you give to a single person not more than the exclusion amount (so for 2024, $18k) in a year, you don’t have to report that amount as a reduction of your estate tax exemption.
And this amount isn’t limited to a single person, you could give 100 people $18k and you’re under the reporting threshold. Additionally, this resets each year, so even if you gave $18k to someone next year, you could again give them up to the gift exclusion the following year without triggering a reduction in your exemption.
Each year this amount is normally adjusted for inflation, so it’s not uncommon for this amount to rise yearly.
Check in with us to make sure you got it down! : 808.546.5026 ext. 303 or info@verity.cpa!
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