The IRS has announced the official estate and gift exclusion amounts for 2023.
For an estate of any decedent dying during calendar year 2023, the applicable exclusion is increased from $12.06 million to $12.92 million. This change increases not only the applicable exclusion amount available at death, but also a taxpayer’s lifetime gift applicable exclusion amount and generation skipping transfer exclusion amount. This means a husband and wife with proper planning could transfer $25.84 million estate, gift and GST tax free to their children and grandchildren in 2023. If no new tax law is passed, the increased exclusion amounts are scheduled to expire on December 31, 2025, which would mean a reduction in the exclusion amounts to $5 million plus adjustments for inflation.
While the estate, gift, and GST tax rate remains the same at 40%, the gift tax annual exclusion in 2023 will increase $1,000 to $17,000.
The gift tax annual exclusion to a non-citizen spouse has been increased from $164,000 to $175,000. While gifts between spouses are unlimited if the donee spouse is a United States citizen, there are restrictions when the donee spouse is not a United States citizen.
The New York exclusion amount was changed as of April 1, 2014, and does not match the federal exclusion amount. In 2022, the New York exclusion amount is $6.11 million. The 2023 New York exclusion amount has not yet been determined. It is important to note that, unlike the Federal exclusion amount, the New York exclusion amount is not portable, meaning if the first spouse to die fails to utilize his or her full exclusion amount, the surviving spouse will not be able to utilize the first spouse to die’s unused New York exclusion amount.