Taxes on Gifts and Inheritances in the US: Lifetime Exclusion
US TAX CIS✦ What is the lifetime exclusion?
It is the amount that can be transferred as gifts or inheritance during one’s lifetime or upon death without being subject to taxation. For 2024, the exclusion limit is $13.61 million per individual.
✦ How it works:
Gifts exceeding the annual limit ($18,000) reduce the available lifetime exclusion. Importantly, the gift and estate tax exclusions are unified. Upon inheritance, the remaining exclusion is applied to the total value of the estate to reduce potential taxes.
✦ Planned changes:
The current elevated limit is set to expire at the end of 2025 due to the temporary provisions of the Tax Cuts and Jobs Act (TCJA), introduced during Donald Trump's administration. After Trump's re-election, the likelihood of maintaining the increased limit in 2026 and beyond has risen, particularly if Congress supports extending these provisions. However, if no action is taken by the end of 2025, the limit will automatically drop to approximately $6–7 million per individual under existing law.
✦ Practical significance:
The lifetime exclusion offers a valuable opportunity to transfer substantial assets tax-free, making it particularly relevant for family and business succession planning. Utilizing the exclusion before 2026 helps mitigate potential tax increases in the future.
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