As we approach the end of the year, it is never too early to start planning your gifting for 2025. The inflation-adjusted gift and estate tax basic exclusion amount (BEA) has increased for the upcoming year. The BEA amount increased to $13.99 million (up from $13.61 million for estates of decedents who died in 2024). This means an individual can gift up to $13.99 million without any gift tax liability. The BEA amount for those who are married doubles to $27.98 million. If you have already gifted $13.61 million in prior years, you now have an additional $380,000 per individual or $760,000 per married couple to gift during 2025.
In addition to the increase in BEA, the annual exclusion amount increased to $19,000 ($38,000 for married donors) in 2025. This amount is up from $18,000 in 2024. The annual exclusion is the amount an individual can gift during the calendar year without using any portion of the BEA. Additionally, in any given year, there is no limit on the number of donees to whom a donor can gift. If a gift to a specific donee exceeds the annual exclusion amount, it will simply reduce the BEA amount. This can be a useful planning technique for those who have grandchildren. One can gift the annual exclusion each year and avoid the Generation-Skipping Transfer Tax. Additionally, there are certain situations where the gift tax does not apply. For example, gifts made to a donor’s spouse (a U.S. citizen) are generally not subject to the gift tax.
Be sure to remember during the holiday season to take advantage of what exemptions or exclusions remain for you in 2024 while you start planning for 2025. As the saying goes, it is better to give than to receive.
Another important note is that, without new legislation, the BEA amount is expected to drop significantly after 2025 to a projected $7 million. However, with the incoming administration and Republicans controlling a small majority of the House and Senate, there is a good possibility the increased BEA will be extended. It may be best to contact your WG tax advisor if you have any questions or would like more clarity on this subject.
