Federal Estate and Gift Tax Exemption Updates for 2023

Due to changing IRS rates year-to-year, it’s wise for those planning to maximize the value of their estate for the benefit of their loved ones to stay informed about what those changes are and seek professional guidance to ensure they’re aware of their options going forward.

The IRS recently raised the Federal 2023 Estate Tax Exemption to $12.92 million. For those planning to leave an estate to their loved ones, any amount – including gifts – below this amount is exempt from estate tax at the federal level. This exemption, adjusted for inflation each year, is $860,000 more than the 2022 estate tax. This amount is reflected for married couples with coordinated estate plans which can shield up to $25.84 million from federal estate tax in 2023. 

Let’s take a closer look at what this means for updated gift tax exemptions and other tax implications and opportunities as wealthy Mississippians look to create and update their estate plan in 2023.

Federal Gift Tax Exemption

The increased estate tax exemption for 2023 coincides with the federal gift tax exemption – meaning you can gift $17,000 annually to your heirs and loved ones as present interest gifts (or $34,000 for most married couples).

For taxpayers who have distributed their available exemption through lifetime gifting, the increase in the coming year gives an additional boost of $860,000 in tax-free gifting next year, while married couples can give a combined $1.72 million.

Revisiting your Estate Plan to Address the Changing Gift Tax Rates

Though many investments have experienced a decline in their value over the course of the year, with an expected recovery in their value over the long term, it may be beneficial to update gifting considerations as the holiday season and year’s end approaches.

Though Congress may make some changes in the interim, it’s wise to be prepared for this exemption to end in 2026, as reflected in current legislation, and revert to the prior exemption amount of $5 million, adjusted for inflation, or $7,000,000. Consideration should be given to estate planning to utilize this larger exemption amount before 2026.

It’s also wise to note that gifts to spouses, in most cases, are unlimited. Still, each individual situation is unique, and we recommend those looking to maximize the value of their estate seek customized advice from both financial and legal advisors in their area.

Receive Guidance from Those with Estate Planning and Tax Expertise

The team at Lancaster Law Firm is committed to protecting the legacy of those looking to shield their estate from state and federal tax implications. As experts in estate tax law, we can share guidance to help you make the most out of existing and future exemptions. For more information, or to discuss the implications of these current changes and available opportunities, contact us for a virtual or in-person consultation at your earliest convenience.