Gift And Estate Tax Changes For 2022: What You Need To Know

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The IRS just announced important gift and estate tax changes for 2022 that you’ll need to know.

Higher Gift Limits

The annual gift exclusion increases to $16,000 for calendar year 2022, up from $15,000 for calendar year 2021. That’s the amount you can gift to anyone during the year, whether children, family, or friends, without reporting the gift. (Some exceptions and exclusions apply, so talk with your attorney or financial advisor).

Higher Estate Limits

The unified credit amount for estates – basically the amount a decedent can exclude from estate taxes in 2022 – increases to $12,060,000 per person, up from $11,700,000 for the estates of decedents who died in 2021. In general, that’s the amount of money you can leave at your death without paying any estate taxes.

But Estate Tax Changes May Be Ahead

Don’t forget that these estate tax amounts are expected to reset or “sunset” after 2025 when the new, higher limits expire per Congressional direction and drop back to pre-2018 levels (that will mean a drop closer to $5 million, adjusted for inflation).

In fact, some lawmakers are trying to drop estate tax levels to the $5 million level as soon as next year, although those measures have not yet succeeded. Given the changing tax backdrop, it’s important to talk to an estate planning attorney about streamlining your estate and avoiding taxes as much as possible.

Don’t Neglect Your Estate Planning

Don’t neglect your estate planning. You need proper planning to minimize any taxes and make sure your assets go where you intend. If you are subject to federal estate taxes, the tax bite could be as high as 40%.

“This is the time to act even if the Build Back Better Act winds up not making any estate tax changes,” says attorney and author Teresa J. Rhyne. “At a minimum, we know the estate and gift tax exemption will drop significantly in 2026, and that’s not very far away.”

Questions? Talk to your financial advisor or estate planning attorney. Clients, be sure to ask us if you need additional information or an attorney recommendation.