The federal lifetime gift and estate tax exclusion will increase for inflation in 2023 to $12.93 million. In Connecicut, the state estate and gift tax exemptions were also increased to $12.93 million. That is a huge increase from the 2022 exemption amount of $9.1 million. There may be similar increases for inflation in 2024 and 2025, according to a recent article from Think Advisor titled “The Estate and Gift Tax Exclusion Shrinks in 2026. What’s an Advisor to Do?”.
This is the good news for wealthy Americans. However, there’s bad news in the near future. Under the Tax Cuts and Jobs Act, these historically high levels will end on December 31, 2025. Estate and gift exclusions will drop to the pre-2017 level of $five million, adjusted for inflation. Estimates for 2026 vary, but most expect the amount may reach $6.8 million per person. In Connecticut, there will be a similar reduction in the exemption amounts.
For Americans who saw the value of their homes and portfolios increase in the last ten years, this level becomes uncomfortably close when considering the overall value of their estate. Here’s some help on how to minimize estate taxes in coming years.
What is the Estate and Gift Tax Exclusion in 2023?
Every year the annual estate and gift tax exclusion is adjusted for inflation. Gifts at or below this amount are not counted towards your lifetime exemption. For example, in 2022, the annual exclusion was $16,000 and in 2023, it is $17,000.
Reference: Think Advisor (Dec. 7, 2022) “The Estate and Gift Tax Exclusion Shrinks in 2026. What’s an Advisor to Do?”