What You Need to Know About the 2025 IRS Gift and Estate Tax Changes
The IRS recently shared about an increase in gift and estate tax exemptions for 2025. This will impact individuals and families who are planning their wealth transfers. This update is a part of adjustments made for inflation and could make an impact on your estate planning strategies.
What is the New Annual Gift Tax Exclusion?
Now that we’re in 2025, the annual gift tax exclusion increases to $19,000 per recipient—this is the highest exclusion amount ever recorded, the previous limit was $17,000.
This means individuals can give more without reducing their lifetime gift and estate tax exemption. For married couples, the combined gift amount will be $38,000 per recipient—making it a great opportunity to reduce your taxable estate while passing on wealth to your loved ones.
How Does This Benefit Married Couples and Large Families?
For married couples with children and grandchildren, this increase allows for more tax-free transfers. For married couples who have already reached their lifetime gift limit in 2024, they can now give away an additional $760,000 without incurring estate tax.
The new exclusion is particularly important for those with non-US citizen spouses. For 2025, the IRS allows a $190,000 gift to a non-citizen spouse without incurring gift tax. This change is important for people who want to ensure that their spouse can receive significant financial support without the complications of gift tax.
Understanding Lifetime Estate and Gift Tax Exemption
The lifetime estate and gift tax exemption increased to $13.99 million per individual in 2025—this is increased from $13.61 million in 2024. This means that over the course of a person’s lifetime, they can gift up to this amount without incurring estate taxes. Keep in mind that any use of the gift tax exemption will reduce the amount available for estate tax exemption at the time of death.
For individuals making gifts above the annual exclusion, a gift tax return will be due the following year, which helps track how much of the lifetime exemption has been used. You will want to be mindful of how these exemptions are used so you can maximize their benefits.
What Should We Expect in 2026?
Though 2026 may seem far away, it’s important to note that while the IRS has announced the increase in the exemption amounts for 2025, under current law, the lifetime estate and gift tax exemption will reduce by half in 2026.
This means that individuals looking to make large gifts or transfer significant wealth should consider acting before the end of 2025 to take advantage of the higher exemption amounts.
What Should You Do Next?
The increased gift and estate tax exemptions for 2025 present a unique opportunity for high-net-worth individuals and families to make tax-efficient gifts and plan their estates more effectively.
Whether you’re looking to transfer assets to loved ones or make tax-free gifts to a spouse, understanding these changes is important. Contact me today at 📞 818-436-2775 to maximize the benefits of these new tax rules, and to create a plan before things change in 2026.
DISCLAIMER: The content contained herein is for general informational purposes only. These materials do not constitute legal or other professional advice. We do not accept any responsibility for any loss that may arise from reliance on this information. No reader should act or refrain from acting based on information contained in this article without seeking advice of counsel.