Gift Tax Reminders

As the fourth quarter approaches, it is useful to remind clients about gift tax considerations, as they consider possible gifting plans before the end of the year.

First, effective on January 1, 2018, the annual gift tax exclusion has increased to $15,000 per person, per year, up from $14,000 in recent years.

Second, the lifetime exclusion for gift (and estate) tax purposes is $11,180,000, effective January 1, 2018.  This amount is subject to annual indexing for inflation.

Starting in 2018, the tax law that was enacted on December 22, 2017 doubled the lifetime exclusion amount.  Prior to the enactment of the new law, the IRS had already released the lifetime exclusion that was effective for 2018 as $5.6 million.

The new law not only changed the lifetime exclusion, but it also included a new computation for inflation indexing, which was effective on January 1, 2018.  This new computation resulted in a lowering of the previously-issued exclusion amount.  As a result, the IRS reported in Revenue Procedure 2018-18 that the lifetime exclusion that applies for 2018 is $11,180,000, not $11.2 million.