For the first time in several years, the annual gift tax exclusion amount will increase from $15,000 to $16,000 per donor (or $32,000 for married couples who elect to split gifts), as the IRS recently announced in Rev. Proc. 2021-45. This adjustment will take effect for gifts of a present interest made on or after January 1, 2022.
The IRS also announced the annual inflation adjustment for the federal gift, estate, and GST tax exemption, which increases the amount sheltered from taxes from $11,700,000 for 2021 to $12,060,000 as of January 1, 2022.
This increase may be of particular interest to individuals who previously used all of their gift, estate, or GST tax exemption to facilitate significant lifetime transfers. Absent congressional action, the exemption amount is scheduled to revert to an inflation-adjusted $5,000,000 on January 1, 2026—which we anticipate will end up being about half of the current exemption amount.
The gift, estate, and GST tax rate remains at a flat 40% for 2022 for taxable transfers in excess of the transferor’s available exemption.
If you would like to discuss lifetime gifting options to utilize the annual gift tax exclusion or lifetime exemptions, please contact Bonnie Ball Wahrer, or your Pierce Atwood Trusts and Estates attorney.