27 Jan IRS Announces Increase in Gift and Estate Tax Exemptions, Tax Brackets, Etc. for 2025
As of January 1, 2025, you can give up to $19,000 per year, per person (other than gifts of future interests) without reporting to the IRS and without gift taxation. So, for example, if a married couple with three children wanted to give the maximum to each child, then they could give up to $114,000 ($19,000 x 3 by the husband and $19,000 x 3 by the wife) in year 2025 without reporting to the IRS.
If one gives more than $19,000 in a year, the donor (not the one receiving the gift) has a duty to report to the IRS about the amount which is given in excess of the annual exclusion limit. However, that doesn’t mean the donor has to pay a gift tax. As of January 1, 2025, a person (the “donor”) can give, without gift taxation, up to the whole amount the donor is allowed to give at death without estate taxation. If one dies in year 2025, the amount that can be passed without federal estate taxation has increased from $13,610,000 million (in year 2024) to $13,990,000 as of January 1, 2025. So, if a married couple wanted to use both of their full exemptions in year 2025, they could give $27,980,000 in year 2025 (assuming they haven’t given more than the annual gift tax exclusion in prior years). The number is the same for the generation-skipping transfer tax exemption. The estate tax exclusion is scheduled to be reduced to one-half of the 2025 estate tax exclusion amount ($6,995,000) as of January 1, 2026. However, it is not likely considering the recent election (see article on “Tax Planning as a Result of Trump’s Election”).
Although there is no limit to gifts between spouses if they are U.S. citizens, if one spouse who is not a U.S. citizen receives a gift from a U.S. citizen spouse, the gift without taxation is limited to $190,000 in year 2025 (up from $185,000 in year 2024). This is not included in the total amount of taxable gifts. The annual gift tax exclusion is not applicable to transfers in connection with means-tested public benefits such as Medicaid which has rules to prevent fraud.
Also, the amount one can give as a qualified charitable distribution (QCD) has increased from $100,000 in year 2024 to $105,000 in year 2025. Since most taxpayers use the standard deduction instead of itemizing, taxpayers who are at least 70½ (even if they have to take required minimum distributions until age 73) will not have to pay income taxes on the distribution if the contribution goes directly from the IRA to the charity. You do not have to give the full amount of the RMD to a charity.
Also, income tax brackets have changed. The highest income tax bracket of 37% is (1) $751,600 in adjusted gross income for those who are married and filing jointly and (2) $626,350 for either those who are unmarried or heads of households and over $15,650 for estates and most irrevocable trusts.
The standard deduction for year 2025 will be (1) $30,000 for married individuals filing jointly, (2) $22,500 for heads of households and (3) $15,000 for unmarried individuals or for married individuals filing singly.
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