The total amount that a U.S. citizen or resident can transfer to another individual free of estate, gift, or generation-skipping transfer (GST) taxes (collectively, the “transfer taxes”) has been set at a base amount subject to an annual adjustment for inflation. The base amount currently is $10 million (set in 2017).
What is the transfer tax exemption for 2024?
The 2024 transfer tax exemption amount is $13.61 million ($10 million base amount plus an inflation adjustment of $3.61 million).
The tax rate applicable to transfers above the exemption remains 40%.
What is the gift tax annual exclusion amount for 2024?
The gift tax annual exclusion allows taxpayers to make certain gifts without eroding the taxpayer’s lifetime exemption amount. The gift tax annual exclusion in 2024 increased to $18,000 per donee.
What payments are excluded from the annual and lifetime gift tax exemption?
A donor may exclude from his annual and lifetime gift tax exemption all gifts to his/her spouse as long as the spouse is a U.S. citizen, payments of tuition made directly to the donee’s educational institution, and payments for medical expenses (including medical insurance) paid directly to the donee’s medical or medical insurance provider.
There is a separate gift tax annual exclusion for gifts to spouses who are not citizens of the United States, which is adjusted to $185,000 in 2024.
Are the current high transfer tax thresholds permanent?
The Tax Cuts and Jobs Act, which was enacted in December 2017, provided that the current $10 million base exemption amount for the transfer taxes is effective through 2025 and reverts on January 1, 2026, to the $5 million base exemption amount established by the American Taxpayer Relief Act of 2012.
How have the federal transfer tax exemption amounts changed over the years?
The transfer tax exemptions (and the highest marginal transfer tax rates) have undergone several sweeping changes in the last three decades. The exemption amounts have been fully unified since 2011.
Since 1997, the estate tax, gift tax, and GST tax lifetime exemption amounts have changed as follows:
| Estate & Gift Lifetime Exemption[1] | GST Lifetime Exemption | |
| 1997 | $600,000 | $1,000,000 |
| 1998 | $625,000 | $1,000,000 |
| 1999 | $650,000 | $1,010,000 |
| 2000 | $675,000 | $1,030,000 |
| 2001 | $675,000 | $1,060,000 |
| 2002[1] | $1,000,000 | $1,100,000 |
| 2003[1] | $1,000,000 | $1,120,000 |
| 2004–2005[1] | $1,500,000 | $1,500,000 |
| 2006–2008[1] | $2,000,000 | $2,000,000 |
| 2009[1] | $3,500,000 | $3,500,000 |
| 2010[1] | $5,000,000[2] | [3] |
| 2011 | $5,000,000[4] | $5,000,000 |
| 2012 | $5,120,000 | $5,120,000 |
| 2013 | $5,250,000 | $5,250,000 |
| 2014 | $5,340,000 | $5,340,000 |
| 2015 | $5,430,000 | $5,430,000 |
| 2016 | $5,450,000 | $5,450,000 |
| 2017 | $5,490,000 | $5,490,000 |
| 2018 | $11,180,000[5] | $11,180,000 |
| 2019 | $11,400,000 | $11,400,000 |
| 2020 | $11,580,000 | $11,580,000 |
| 2021 | $11,700,000 | $11,700,000 |
| 2022 | $12,060,000 | $12,060,000 |
| 2023 | $12,920,000 | $12,920,000 |
| 2024 | $13,610,000 | $13,610,000 |
What does this mean for you?
The changing landscape of federal transfer taxes has led to challenges and opportunities in estate planning. In view of the recent changes and the scheduled “sunsetting” of the estate, gift, and GST tax exemption amounts, please consult with your Nixon Peabody LLP attorney about your estate plan.
- Between 2002 and 2010, the lifetime exclusion for gifts was capped at $1 million.
[back to reference ] - In 2010, estates had to choose between a “no estate tax” system that afforded a limited step-up in tax cost for the decedent’s assets or a $5 million federal estate tax exemption with a full step-up in tax cost.
[back to reference ] - In 2010, the GST tax exemption was $5 million, but the GST tax rate was 0.
[back to reference ] - The American Taxpayer Relief Act of 2012 set a base amount of $5 million, subject to inflation.
[back to reference ] - The Tax Cuts and Jobs Act set a base amount of $10 million, subject to inflation, and provides that the base amount sunsets and reverts to prior law effective January 1, 2026.
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