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2023 Update for Federal Estate and Gift Taxes

On Behalf of | Jan 16, 2023 | Estate Planning

If you’re in New York and have significant assets, you’ve probably already considered how you’ll want to manage your estate after you die. But changes in federal tax laws can cause you to adjust your plans.

Each year, the IRS can change certain tax exemptions and exclusions due to inflationary pressures. For 2023, they have adjusted both the unified credit and the annual gift tax exemption, which may have ramifications for your estate administration.

What are the unified credit and annual gift tax exemptions?

The unified credit is another term for the lifetime estate and gift tax exemption. It refers to the total amount that one person can pass along (via either gifts or after they die) before estate taxes are levied.

The annual gift tax exemption is the amount of money a person can give to another individual without incurring gift taxes. Note that the gift tax exemption is per individual receiving the gift, not per giver. So, for example, if you have three children, you can give each of them a gift up to the annual gift tax exemption each year.

What are the newest changes?

In 2023, the unified credit increases from $12.06 million up to $12.92 million. As always, unified credit can be used between spouses. A married couple may bequeath a value up to $25.84 million before paying estate tax.

The annual gift tax exclusion has increased from $17,000 to $18,000. So, if you give annual gifts to more than one person, you can effectively give $1,000 more per individual.

These 2023 changes allow you to pass along more assets without incurring an estate tax burden. But it’s essential to continue to monitor the tax situation as the years go on. The estate tax has been debated in Congress periodically over the past few decades, and new laws have the potential to alter your plans for your estate.