There is a gift tax on property or cash you give away, but tax code provides a gift tax annual exclusion. This is an amount you can give to anyone, and as many people as you wish, with no tax and no use of your lifetime exemption. The exclusion amount went up to $18,000 January 1, 2024. If you are married, you and your spouse will be able to gift $36,000 per year, per person.
In addition, there is a per person lifetime gift and estate tax exemption. For 2024, the amount will be $13.61 million per individual. This is up from $12.92 million in 2023. This increase means that a married couple can shield a total of $27.22 million without having to pay any federal estate or gift tax. For those who had already maxed out use of their lifetime exemption, this increase means that after January 1 they may now give away another $69,000 ($138,000 for a couple) with no gift or estate tax.
The lifetime exemption amount is adjusted upward each year for inflation, but under current law the tax exemption will be cut in half after December 31, 2025.
Individuals or couples facing estate tax can use annual exclusion gifts to significantly reduce their taxable estate over the years. For married couples, the increased annual exclusion means that they can give $36,000/year per recipient in 2024. As an example, if a married couple have three children and five grandchildren, they may transfer $288,000 in 2024 to their descendants without touching their lifetime exemption . Not only are the assets removed from the taxpayers’ taxable estates, the assets’ future appreciation also avoids gift and estate taxes.
