Estate and Gift Tax Exemption Gets a Boost in 2025
The Internal Revenue Service has announced an increase in the estate and gift tax exemption for 2025. This change affects individuals who make tax-free transfers during life or at death.
New Exemption Amounts
As of 2025, the “basic exclusion amount” will rise to $13.99 million per person, up from $13.61 million in 2024. This increase applies to various provisions, including federal income tax brackets, long-term capital gains tax brackets, and eligibility for the child tax credit.
Temporary Measure
It’s essential to note that this higher exemption is temporary and will expire after 2025 unless Congress takes action. If the provision expires, the exclusion will revert to 2017 levels, adjusted for inflation.
Background on the Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act, enacted by former President Donald Trump, doubled the exemption to $11.18 million in 2018. However, this provision is set to sunset without Congressional intervention.
Impact on Financial Planning
This change may impact financial planning for individuals with significant assets. It’s crucial to consider the potential implications of this temporary measure when making decisions about estate and gift tax planning.
What’s Next?
As the expiration date approaches, it’s likely that there will be further discussions about the future of the estate and gift tax exemption. Individuals who may be affected by these changes should stay informed and consult with their financial advisors to ensure they are prepared for any potential outcomes.
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