Gift Tax Exemption
While the lifetime exemption considers the total amount of all gifts made throughout your lifetime or at the time of your death, another beneficial tax avoidance option may be used yearly and is available to you at all times. Because of the yearly gift tax exemption, each taxpayer can provide taxable gifts to an unlimited number of beneficiaries each year without incurring any gift tax liability. The value of these donations will not be deducted from the lifetime exemption that you have available. The yearly gift tax exclusion limit for individuals will increase from $16,000 to $17,000 in 2023. The current limit is $16,000. Married couples can combine their individual exclusions and gift assets totaling up to $34,000 by using the gift-splitting option. Consider the following scenario as an illustration: you are married with a total of four grown children and six grandchildren. Each of your children and grandchildren might receive a tax-free gift of up to $34,000 worth of property from you and your spouse each year. That equates to a total of $340,000 in assets that can be left to heirs in a single year without having to pay gift or estate taxes to the federal government. You would not have to use any of your lifetime exemption if you transferred $3.4 million over the course of ten years.
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