Every year, the Internal Revenue Service publishes a list of inflation adjustments. You can find them on the IRS website in Revenue Procedure 2023-34. Here are the important inflation updates for 2024 that relate to Gift and Estate Taxes. (I also include a few other useful inflation updates for 2024 as well.)
Federal Estate & Gift Tax Inflation Updates for 2024
- 2024 Annual Gift Tax Exclusion will increase to $18,000. This means a person can give any other person at least $18,000 before it is subject to the federal gift tax. Also, a husband and wife may split a $36,000 gift for tax purposes before there is a gift tax.
- 2024 Annual Gift Tax Exclusion for Gifts to Non-Citizen Spouses will be $185,000. This is the maximum amount a person may transfer to a non-citizen spouse before the gift is subject to a gift tax. In order for US law to apply, generally this will be a gift that is being made to a permanent resident alien spouse. One place where this gets triggered unexpectedly by many is retitling of real estate. Give careful thought to adding a non-citizen spouse to a deed. This exemption is up from $175,000 in 2023.
- The 2024 Federal Estate Tax Exemption will be $13,610,000. This means that if you die in 2024, the federal government will not tax the first $13,610,000 that you pass on (unless you have made large gifts in previous years). US Citizens and permanent resident aliens are entitled to the federal estate tax exemption. (Remember, this large exemption is scheduled to sunset at the end of 2025.)
- The 2024 Federal Lifetime Gift Tax Exemption will also be $13,610,000. This is in addition to the annual gifts that a person can make. (Be careful that you do not gift highly appreciated assets!)
- 2024 Reporting Requirements for Large Gifts Received from Foreign Persons: If you receive a gift or an inheritance from a foreign person, you may be required to report it. Recipients of gifts from certain foreign persons are required to report gifts under §6039F if the aggregate value of gifts received in a taxable year exceeds $19,570.
Income Tax Brackets – Inflation Updates for 2024
- Marginal Rates: For tax year 2024, the marginal tax rates will be:
- top tax rate remains 37% for individual single taxpayers with incomes greater than $609,350 ($731,200 for married couples filing jointly);
- 35%, for incomes over $243,725 ($487,450 for married couples filing jointly);
- 32% for incomes over $191,950 ($383,900 for married couples filing jointly);
- 24% for incomes over $100,525 ($201,050 for married couples filing jointly);
- 22% for incomes over $47,150 ($94,300 for married couples filing jointly);
- 12% for incomes over $11,600 ($23,200 for married couples filing jointly).
- The lowest rate is 10% for incomes of single individuals with incomes of $11,600 or less ($23,200 for married couples filing jointly).
- Marginal Rate for Estates and Trusts: For tax year 2024, the marginal tax rates will be:
- 37% for income over $15,200;
- 35% for income over $11,150;
- 24% for income over $3,100; and
- 10% for income under $3,100.
Section 199A Qualified Business Income Deduction Inflation Updates for 2024
- 2024 Section 199A Qualified Business Income Deduction: If you have a pass-through business, such as an LLC, S-Corporation, or a partnership, you may be entitled to a 20% deduction. If you are a professional or a consultant, there is usually a cap on how much income you can earn in order to take advantage of this deduction. For 2024, the income limits are:
- $383,900 for married filing joint returns (phase-in range of $483,900);
- $191,950 for married filing separate returns (phase-in range of $241,950); and
- $191,950 for all other returns (phase-in range of $241,950).
Why Tracking Inflation Updates is Important
In order to maximize the amount that you can pass on to your loved ones in a tax-exempt manner, it is important to keep track of the inflation updates. Knowing the inflation updates for 2024 will be critical in determining how much you can gift to trusts or your children. For advice specific to your situation, the tax attorneys at The Pollock Firm LLC are available to assist you.
Source: IRS Rev.Proc. 2023-34 IRC Section 2001
*The featured Image by Asako Yoshino (Pearly Arts)
