Take advantage of higher gift tax exclusions and exemptions before they potentially expire

Casey Bear |

Gifting and charitable donations are often used to reduce taxable incomes and redistribute wealth within a family.  In 2022, a taxpayer can gift up to $16,000 to someone without triggering the gift tax. The annual exclusion is per recipient, not the sum total; for example, a father could gift $16,000 to his son, another $16,000 to his son’s wife, another $16,000 to a friend, and so on all in the same year without having to file a gift tax return.  Each year, the exclusion amount resets. 

While this level of tax-free annual gifting can appeal to many, some high-net-worth individuals may wish to instead take advantage of 2022’s relatively high lifetime gift tax exemption to maximize a tax mitigation strategy.  This allows the taxpayer to gift up to $12.06 million cumulative over a lifetime (doubled for married couples) to whomever he or she chooses without triggering gift and estate taxes.  Unlike a testamentary gift, which is designated to be distributed after the giver’s death, a lifetime gift allows the giver to witness the recipients enjoying the gift.  It also reduces the size of the taxable estate and lowers the eventual tax burden on its beneficiaries.

The annual lifetime gift tax exemption amount is set to revert to approximately $6.2 million in 2025.  This makes now an opportune time to determine if a lifetime gift is the right addition to your comprehensive wealth management plan.  Contact a Cranbrook Wealth Management investment professional for more information.