IRS Announces 2024 Tax Adjustments: What You Need to Know for Your Estate Planning

On November 9, 2023, the Internal Revenue Service (IRS) took a crucial step in keeping pace with the relentless march of inflation by issuing Revenue Procedure 2023-34. This directive provides the annual inflation adjustments for various tax provisions, offering valuable insights for individual taxpayers planning their financial strategies for the upcoming tax year. In this article we discuss the key highlights of these adjustments and their implications for estate planning in 2024.

Estate, Gift, and Generation-Skipping Transfer Tax Exemption

One of the headline changes is the adjustment to the estate, gift, and generation-skipping transfer tax exemption amount for the year 2024. The new figure stands at $13,610,000, representing a significant increase from the previous year's $12,920,000. This adjustment has crucial implications for individuals planning the transfer of assets, as it means they can now shield an additional $690,000 ($1,380,000 for married couples) from transfer tax liability compared to 2023.

Annual Exclusion for Gifts

The IRS has raised the annual exclusion for gifts in the calendar year 2024 to $18,000. This is an increase from the 2023 exclusion amount of $17,000.

Gifts to Non-Citizen Spouses

Another noteworthy adjustment involves gifts to spouses who are not citizens of the United States. For the year 2024, the first $185,000 of such gifts (excluding gifts of future interests in property) will not be included in the total amount of taxable gifts made during the year. This represents an increase from the current threshold of $175,000.

Key Takeaways

The key takeaway from these adjustments reflects the continued impact of inflation on tax provisions. The increase in basic exclusion amount means that an individual will be able to transfer $690,000 ($1,380,000 for married couples) more free of transfer tax liability in 2024 than they could in 2023. The $18,000 annual exclusion amount for gifts represents the third increase in three years: the exclusion amount for gifts was increased to $17,000 in 2023 from $16,000 in 2022 after remaining at $15,000 from 2018 through 2021. The legislation authorizing these unprecedented exemptions is set to sunset in 2026. Without new legislation, we anticipate a significant drop in the estate tax exemption at that time. As we step into the tax year 2024, these adjustments underscore the dynamic nature of tax regulations and the need for individuals to stay informed and adapt their financial strategies accordingly. Estate planning demands a proactive approach, and these adjustments provide both challenges and opportunities for those navigating the intricacies of wealth transfer.

If you need any assistance with your estate plan, please contact our Houston law firm at (832) 810-3373.