Inheritance and gift tax exemptions determine how much wealth you can pass on without incurring significant taxes. These exemptions can change, so staying up-to-date on the latest federal and New York tax laws could mean saving substantial money in estate and gift taxes.
What are the Current Federal Estate Tax Exemption and Gift Tax Exemptions?
As of 2024, the federal exemption for estate and lifetime gift taxes is $13,610,000. This means you can gift or leave behind up to this amount without facing federal taxes on your estate. The current annual gift tax exclusion is $18,000. In other words, the first $18,000 gifted to another person does not count toward the lifetime gift total and is not subject to those taxes. Any money over that limit does.
In 2025, the federal government plans to adjust this exemption to levels that existed before the Tax Cuts and Jobs Act of 2017, which will significantly decrease the limit. The current temporary expansion offers a significant opportunity to make strategic gifts that could reduce your estate’s future tax burden.
The IRS has confirmed that those who take advantage of the temporary estate and lifetime gift tax exclusion will not face adverse tax consequences once the federal exclusion amount decreases after 2025. This means that any gifts you make under the temporary higher limits will retain their tax-exempt status, even when the thresholds lower in the future. Understanding and acting on these changes can benefit New Yorkers looking to pass on their wealth efficiently.
New York Estate and Gift Tax Regulations
In New York, the rules for estate taxes are different. New York’s estate tax exemption is $6,940,000 for 2024. Unlike the federal system, New York does not tax gifts directly. However, the state has a “clawback rule” where any gifts made within three years of death are included in its estate tax calculations. If you gift money or property within three years of your death, New York will include these gifts as part of your estate for tax purposes. This could push the value of your estate over the exemption limit and trigger estate taxes, so careful estate planning is still critical if you intend to make substantial gifts.
How Can These Exemptions Affect My Estate Plan?
Understanding and using estate and gift tax exemptions can significantly affect your estate plan by potentially saving you and your heirs significant amounts in taxes. By planning strategically, you can transfer parts of your wealth to your heirs while taking full advantage of these exemptions and reducing the overall tax burden on your estate. For example, making gifts within the current exemption limits could decrease the size of your taxable estate. Careful timing and structuring of your gifts and transfers are critical to effective estate planning.
What a Tax Professional at Amoruso & Amoruso LLP Can Do for You
Are you wondering how the new inheritance and gift tax exemptions could affect your estate planning strategy? Let the attorneys at Amoruso & Amoruso LLP help you prepare. We provide thorough estate planning services that address upcoming tax changes and help you optimize your financial legacy. Call or contact us now for an initial consultation to learn how to keep your estate plan current and effective.
