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Estate And Gift Tax 2023: A Guide To Navigating The Looming Sunset

Estate And Gift Tax 2023: A Guide To Navigating The Looming Sunset

October 11, 2023

Estate And Gift Tax 2023: A Guide To Navigating The Looming Sunset

Tax planning is a crucial part of securing financial stability, especially when it comes to estate, gift taxes, exemption amounts, annual exclusions, and tax rates. With this in mind, as we approach 2023, it’s essential to understand how changes in the estate tax, lifetime gift exemptions, could impact your income tax return.

In 2012, the American Taxpayer Relief Act (ATRA) set the estate and gift tax exemption at a lifetime limit of $5 million. However, over the years, adjustments for inflation and legislation have expanded these limits significantly. Now that we’re nearing the sunset of these exemptions in 2025, understanding their evolution is even more critical.

Takeaways for the Federal Exemption, Lifetime Exemptions, Lifetime Gift and Estate Tax:

  • The lifetime estate exemption is scheduled to increase by $860,000 in 2023.
  • Annual gift limits will also rise from $16,000 in 2022 to $17,000 per recipient in 2023.
  • Without an extension from Congress before its sunset in 2026, the estate exemption will return to its ATRA levels from 2012.
  • The IRS has clarified that estates making gifts during the period from 2018 to 2025 can still use higher exclusion levels if death happens after this timeframe.

The Tax Cuts and Jobs Act (TCJA) of 2017 was a significant turning point for both federal estate tax law and transfer tax reforms. It expanded lifetime limits from $5 million per person - set by ATRA - to a staggering $11.18 million! By this year (2022), both gift tax exclusion and estate tax exemption were indexed once more for inflation bringing up individual exemptions at $12.06 million or up to $24.12 million for married couples.

How Estate Exemptions Will Change In 2023.

In light of current trends within our federal tax system, these amounts are set to rise again next year. We’re looking at an individual limit soaring up towards $12.92 million or doubling for married couples at a whopping $25.84 million! If you’ve already hit your current ($12.06 million) threshold this year without incurring any gift tax consequences yet – congratulations! As of January 1st next year (2023), you’ll be able to hand out another grand sum of up to $860k as part of your lifetime exclusion!

Updates on Gift Tax Deduction and Estate Planning Strategies.

Along with rising lifetime exclusions come increases in annual gift limits too; rising from today’s norm of giving away gifts worth up-to $16k each recipient annually onto a marginally better figure standing tall at seventeen thousand dollars starting next year! This means that married couples can now jointly present beneficiaries with gifts worth up-to thirty-four thousand dollars – all while maintaining tax efficiency!

However, don’t forget about TCJA’s sunset looming over us like an ominous cloud on December 31st, 2025 unless Congress takes action prior! Otherwise, starting Jan. ’26 onward– we all step back into ATRA times revisiting old norms once again adjusting for inflation where large gifts won’t harm estates post-sunset according to IRS regulations.  As such rulings stand today; wealth holders should work alongside their respective advisors to solidify their gifting plans before end-of-year while also considering the potential benefits of further gifting come new-year!

Understanding The Process Of Estate Taxation.

Estate tax applies to an individual’s estate, and it is managed by the executor or administrator of the deceased person’s will. The process begins with calculating the total value of all assets (gross estate) owned by the deceased at their time of death. Following this, applicable deductions are taken into consideration to derive at a final value on which taxes are levied. (also, called taxable estate).

The tax rates for estate taxes are typically progressive in nature. This means that as the value of an estate increases, so does the applicable tax rate.  Responsibility for payment of these taxes falls on the shoulders of the executor or administrator who oversees the estate. The timeline for paying these taxes can vary based on specific state law and may occur either before or after distributions to heirs have been made.  It’s worthwhile to highlight that certain states provide exemptions aimed at reducing tax liability for particular estates.

So if you want to make sure your heirs receive their inheritance without draconian deductions or if you want your surviving spouse not worry about paying off any hefty sums - start planning ahead now with qualified professionals. Proper estate planning can decrease potential taxes on your estate, future tax & income, and wealth transfers.  To ensure maximizing benefits from such exemptions while they last or getting around possible reductions once they’re gone – consult with an experienced attorney or trusted advisor within realm today ensuring smoother transitions tomorrow!


About the Author:

Damon Paull is a Marine Corps veteran who has traveled to over 20 countries. As a financial advisor in Houston, Texas, he is passionate about helping business owners and individuals pursue their financial goals. You can connect with Damon and his team at: 703.362.5747 or


Note: Of course this article is not to be construed as individual tax, legal, or individual financial advice.