A Brief Summary Of Current Tax Issues – 2nd December

handing over money

A Brief Summary Of Current Tax Issues – 2nd December

Due to the most recent inflation adjustments, taxpayers will have even more estate planning options in 2023 than they did previously.

Give gifts for a lifetime. The annual gift tax exclusion allows you to give gifts worth up to a certain amount to recipients each year without having to pay gift tax on those gifts. From $16,000 in 2022 to $17,000 in 2023, each recipient will be eligible for the gift tax exclusion. So you can give $85,000 to five members of your family tax-free in 2023 ($17,00 per recipient). When a married couple makes a joint gift, the amount is effectively doubled.

Prepare for a larger exemption. Additionally increasing next year is the exemption from estate and gift taxes. The exemption will increase to $12.92 million in 2023, up from $12.06 million in 2022, according to the IRS. Even better, the “portability” clause allows a married couple to take advantage of each other’s unused exemption. In effect, the maximum estate tax shelter for a couple in 2023 is 25.8 million. However, after 2025, the exemption will revert to $5 million plus inflation indexing.

You are eligible for special use valuation. Business real estate can be valued by the estate of a small business owner at its current use rather than its fair market value thanks to a special tax law provision. The cap for this tax break known as “special use valuation” will rise to $1.31 million in 2023 from $1.23 million in 2022. However, certain conditions must be met in order to be eligible for the tax break. For example, the owner of the business must have a gross estate that is at least 50% made up of the business real estate.

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