2023 Updates to Gift Taxes and Annual Exclusion Amounts

The annual gifting exclusion limits set by the IRS determine the maximum amount of money or assets that an individual can give to another person without triggering a filing requirement or gift tax.

The exclusion increases to $17,000 in 2023. The annual exclusion limit has not been set for 2024 however, since 2021 the limit has been increasing by $1,000 per year. This means you can gift up to the annual exclusion amount to any individual in a calendar year without having to report the gift or pay any gift tax.

Married couples have the option to “split” their gifts, effectively combining their individual exclusion limits. This means that a married couple can jointly give up to $34,000 in 2023 to an individual in a calendar year without triggering any gift tax. Both spouses need to consent to splitting the gift and be married at the time the gift was made, among other considerations. If the couple becomes divorced or widowed after the gift, the couple can still split the gift if neither remarries during the rest of the calendar year.

It’s important to note that the annual exclusion applies to each recipient separately. This means that you can give $16,000 (or $32,000 for married couples) to multiple individuals without facing gift tax consequences if each gift remains within the exclusion limit. In community property states such as Washington, the gift is automatically split between spouses. A taxpayer and their spouse can gift up to $64,000 to their child who is married since half will go to the child and the other half goes to the child’s spouse.

The exclusion limits may be subject to change, so it’s essential to refer to the most up-to-date IRS guidelines for the current year. Gifts that exceed the annual exclusion limit will require you to file a gift tax return, Form 709, with the IRS. However, it’s worth mentioning that most individuals won’t owe any gift tax unless their lifetime gifts exceed the lifetime gift and estate tax exemption, which is a significantly higher amount.

It is important to keep your CPA informed of any gifts made during the year to ensure proper reporting. Please feel free to reach out to our office with any questions.