This article provides an overview of the 2021 gifting limits and annual gift exclusion in the United States. The gifting limits and federal exclusion amounts are subject to change.You may already be making gifts to your children, grandchildren, great grandchildren or other heirs as part of a tradition in your family. If so, you may not be aware of the advantages this practice can provide in terms of your estate plan. If you never engaged in a one time or ongoing practice of gifting, maybe it is something you want to start doing as part of a way to share what you have with those closest to you and enjoy it while you are alive. Although the practice of making inter vivos gifts has a long history in estate planning, many people that are both givers and receivers do not know it may have a beneficial impact down the road when taxes may be applied to the donor's estate.
Before we discuss what the current gifting limits and exclusion amounts are at the federal level, we need to stress that if your estate is not one which would be subject to estate, gift or GST taxes, then you typically would not be concerned with engaging in the practice of gifting simply to reduce the size of your estate for tax purposes. In the year 2021, the federal exclusion amounts are substantial. During times when the exclusion amounts are large, fewer estates are actually subjected to estate, gift, and GST taxes. However, reductions in the exclusion amounts are anticipated in the near future. Lower exclusion amounts could result in more estates being exposed to this type of tax liability. When that happens, many in the United States may wish that had engaged in a regular practice of gifting and used the annual gifting limits to pass on wealth to their heirs.2021 is a year in which anyone that may be passing on an estate or could potentially receive an inheritance should keep in touch with a financial advisor or estate attorney to ensure their interests are protected. Many changes to our current system of death taxes and related types of taxes are currently being proposed. Because executive and legislative change often happens quickly, make sure your advisor or legal counsel knows you want to receive updates on changes that may require you to take action.
2021 Gifting Amounts and Exclusions
Listed below are some of the most important limits and amounts regarding federal gift taxes in the United States for the 2021 tax year.The gift tax exemption amount for 2021 is $11,700,000 for an individual. For purposes of federal taxes in the U.S., the gift tax exemption is also known as basic exclusion amount and the BEA.
The combined gift tax exemption amount in 2021 for a married couple is $23.4 million in the United States.When is this figure relevant? In this context, the exclusion amount applies to individuals that die during the 2021 tax year, also called the decedent.What about with regard to tax returns? The exclusion amounts discussed on this page would generally be applicable for the 2021 tax year for which a tax return would typically be filed in 2022.
The 2021 Annual Exclusion for Gifts
So many laws and regulations have changed over the past year. You may be surprised to learn there has been no change in the annual exclusion for gifts in 2021. The 2021 annual exclusion for gifts is $15,000. This figure is the same as the annual exclusion for gifts in tax year 2020. An overview of the federal exclusion amounts and gifting limits that applied during the 2020 tax year is available in our article on 2020 Gifting Limits.
Amount Married Couple Can Gift in 2021
Many parents make substantial gifts to their adult children to help them get started with a new home purchase, to pay off debts, assist with childcare expenses, and for other reasons as well. Similarly, grandparents often make large financial gifts to their grandchildren. As a married couple, you may want to work with your estate planning attorney or CPA to develop a gifting strategy that incorporates the federal gifting rules.For those interested in using the practice referred to as gift splitting, married couples complying with applicable rules for the 2021 annual gift exclusion may gift $30,000 to any person or donee in 2021.Whether you file your tax returns jointly or as an individual, be sure you and your spouse or partner have a solid understanding of how each gift impacts your federal and state tax filings. If you are making gifts to help your children or others, you may go over the permissible amounts at some point. Be aware that depending on factors such as the amount and type of each gift, the type of recipient, where you reside, etc., you may be required to file a Gift Tax Return or other types of federal or state tax filings. To avoid having to make changes to what you already gifted or plan to gift, get professional tax advice in advance so you know what is involved.
All limits for gifting and estate, gift, and GST tax exclusion numbers posted on this page are applicable to federal taxes in the U.S. Be aware that state taxes may also apply to individuals, estates, inheritances, etc., but this article does not address any state taxes, laws or regulations.Always consult a tax professional for information on any federal, state or local taxes that may apply in any circumstance or situation. The advice of an experienced CPA or enrolled agent is another avenue to smart estate planning. If you never worked with a tax preparer before, here are some tips on how to Find a Tax Professional.Published April 25, 2021. Updated May 11, 2021.Copyright 2021 Pennyborn.com. ALL RIGHTS RESERVED.
INFORMATION ON THIS SITE, INCLUDING ARTICLES, ESTATE PLANNING FORMS, AND THE ESTATE PLANNING BLOG, DOES NOT CONSTITUTE LEGAL, FINANCIAL OR TAX ADVICE. Pennyborn.com is not a law firm and is not a substitute for a lawyer. Your use of this site does not create an attorney-client relationship. Information on this site is for educational purposes only and may not be accurate, complete or up to date.
For information about Pennyborn.com and how to advertise on this website Contact Us.