The Internal Revenue Service (IRS) issued the tax inflation adjustments for the 2023 tax year.
The inflation adjustments changes more than 60 tax provisions including the lifetime gift and estate tax exemption amount as well as the annual gift exclusion amount, which are highlighted below.
Other changes of note include:
- Marginal rates. For 2023, the top tax rate remains 37% for individual single taxpayers with income greater than $578,125 ($693,750 for those married filing jointly).
- Alternative Minimum Tax. For 2023, the alternative minimum tax exemption amount is $81,300 and begins to phase out at $578,150. For those married filing jointly, the exemption amount is $126,500 and begins to phase out at $1,156,300.
- Non-citizen spouse annual gift tax exclusion. For 2023, up to $175,000 in gifts can be made to a non-U.S. citizen spouse without incurring any gift tax.
While the 2023 inflation adjustments generally apply to tax returns filed in 2024, understanding the inflation-adjustments at the outset is a beneficial aspect in planning. For more on these annual adjustments, view IRS Revenue Procedure 2022-38 here.
Considering the increase to the annual gift tax exclusion amount for 2023, acting early in the year can be even more advantageous.
Gifting an asset with appreciation potential, such as stock or investment real estate, to an individual or trust, removes the appreciation and income from your tax base for the year of the gift as well as the following years. Additionally, by making the gift early in the year, the recipient benefits from the potential growth of the gift throughout the remainder of the year and beyond.
To learn more about annual gifting and the benefits making tax-efficient gifts, read the Power of Early.
2023 Tax Inflation Adjustments
Act now to maximize your gift and estate tax exemptions.