Big Tax Savings Opportunity Ending 2025

Written by Jordan Reback, Nisivoccia

When the Tax Cuts and Jobs Act (TCJA) was passed, the gift and estate tax exemption for gift tax increased materially. The lifetime exemption for an individual is over $12.9 million dollars and over $25.8 million dollars for married couples.

By the end of 2025, this can be reduced by 50%. Unless future changes are made, the exemption will be reduced to over $6 million for individuals and $12 million for married couples.

For the year 2023, the gift tax exemption for gifts is set at $17,000 to any individual. Once you exceed the $17,000 threshold, you will need to utilize the above gift tax exemption amount.

It’s important to note that various assets can be gifted, including cash, stock market equities, property, and even interests in a family-owned business.

By gifting assets to your children, friends, or other family members, you can protect yourself from potential future changes to the lifetime exemption. This way, you can avoid paying taxes (up to 40%) on the wealth you have generated and accumulated over your lifetime.

One common concern among family members is the age eligibility for inheriting such gifts from parents or grandparents. To address this, Irrevocable Trusts provide a great way to protect assets and ensure smooth transfer without any issues at present.

Additionally, making direct payments to medical facilities or academic institutions is an effective way to avoid gift tax reporting requirements and benefit the intended recipient of the monetary gift.

Remember, planning ahead and having open conversations about these matters are always crucial.

To take advantage of a tax-free transfer of wealth from one generation to the next, please contact your accountant using the office number provided below.

(973) 298-8500