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Gift & Estate Tax Exclusion Changes Beginning January 1, 2023

Posted on December 15th, 2022

The Daly Mills Estate Planning attorneys in Lake Norman know it is nearly impossible to keep up with the Internal Revenue Service (IRS) and its annual Administrative, Procedural, and Miscellaneous tax changes.

However, significant changes were recently announced for the upcoming 2023 tax year to accommodate annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes.

Here is what those changes mean for our North Carolina residents and their gift and estate tax exclusions.

Gift Tax Annual Exclusion

Effective January 1, 2023, the gift tax annual exclusion will increase from the existing limit of $16,000 to $17,000 per recipient.

This means individuals may gift up to $17,000 to as many people as they wish in 2023 without tapping into their lifetime gift and estate tax exemption or paying gift tax.

If you want to double your gifting capacity without tax implications, married couples may gift-split a combined $34,000 per person in 2023.

Combined Gift and Estate Tax Exemption

Also, effective January 1, 2023, the combined gift and estate tax exclusion will increase to $12.92 million — or, $25.84 million for a married couple — up from $12.06 million.

The single or combined gift and estate tax exemption is the total amount of gifts a person may make during their lifetime, including transfers made at death, before being subjected to gift or estate tax.

If an individual has met their existing lifetime gift exclusion, he or she will be eligible to make a tax-free gift of up to $860,000 — or $1.72 million for married couples — starting January 1, 2023.

Generation-Skipping Transfer Tax Exemption

The generation-skipping transfer tax is a federal tax on a gift or inheritance that prevents the donor from avoiding estate taxes by skipping children in favor of grandchildren.

Beginning January 1, 2023, the generation-skipping transfer tax exemption will increase to $12.92 million, up from $10 million.

Know Which Tax Cuts Impact Your Estate Planning

If Congress does not extend it or make it permanent, the Tax Cuts and Job Act is set to expire on December 31, 2025.

That means these exclusions, along with many others that may impact your estate planning strategies, will be reduced by approximately 50%, back to the year 2017 levels, as adjusted for inflation, upon expiration.

It is important to speak with a skilled Mooresville estate planning attorney, so you can look ahead and take advantage of the changing tax exclusions that will benefit both you and your family going forward.

Contact Our Skilled Lake Norman Estate Planning Attorneys for Help

To learn more about how we can help you establish a financial planning strategy to fit your unique needs, call us at (704) 286-8437 to schedule an initial consultation with our estate planning attorneys in Lake Norman, North Carolina today.