Gift tax annual exclusion increases for 2023

Your Guide to State, Local, Federal, Estate + International Taxation

Every year, transfer tax and foreign item figures are adjusted to reflect increases in cost-of-living expenses, following the average Consumer Price Index (“CPI”). Based on the CPI figures reported in 2022 by the U.S. Bureau of Labor Statistics, the IRS has updated certain figures, including the gift tax exclusion.

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Gift Tax Annual Exclusion

The gift tax exclusion will be $17,000 for gifts made in 2023 ($34,000 for a married couple). This is a $1,000 increase from the 2022 exclusion of $16,000.

Unified Estate and Gift Tax Exclusion

Also known as the “lifetime exemption”. For 2023, the total lifetime gifts made or transfers on death will have a $12,920,000 exclusion amount ($25,840,000 for a married couple). This is an $860,000 increase from the 2022 amount of $12,060,000.

Generation-Skipping Transfer Tax Exemption

This amount mirrors the Unified Exclusion, also with an increase to $12,920,000 in 2023.

Annual Exclusion for Gifts to Noncitizen Spouses

Gifts made to noncitizen spouses in 2023 have an exclusion amount of $175,000, an increase of $11,000 from 2022.

Foreign Gift Reporting

Reporting is required if aggregate foreign gifts from a nonresident alien or individual estate and from foreign partnerships or corporations exceeds a certain amount during the given tax year. For gifts from nonresident aliens or individual estates, this amount is $100,000. For foreign partnerships or corporations, the amount in 2023 is $18,567, compared to the 2022 amount of $17,339.

Foreign Earned Income Exclusion

The foreign earned income exclusion will increase to $120,000 in 2023, for comparison this figure in 2022 was $112,000.

Expatriation

For 2023, an individual is a covered expatriate if their average annual net income tax for the five tax years ending before the date of the loss of U.S. citizenship is more than $190,000, an increase of $12,000 from 2022.

This information is general in nature and should not be relied upon. If you have specific questions, please contact your Henry+Horne advisor.

Haley M. Braun, CPA

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