Kathryn Bruns, CPA
"Gift Tax" refresher and new 2023 amount
Hi clients and friends, I'm catching up on the last month's tax news before immersing myself too deeply into tax season. I came across the announcement/reminder that for 2023, the "gift tax exclusion" has gone up to $17,000 per person per year. I thought a refresher on the gift tax would be a good idea since it is tied to estate taxes and can be difficult to sort out.
We are all allowed to give away during life/leave at death up to $12.92 million (2023) without owing any "federal gift/estate tax". These "giveaways' are called "gifts".
If you don't exceed the $17,000 per person per year limit, these gifts don't count towards the above $12.92 million limit and aren't even reported. These gifts are "nontaxable". If you DO exceed this $17,000 per person per year limit, then the excess portion of the gift is deemed "taxable" and you must file IRS Form 709 to report it, which will reduce the $12.92 million limit. No actual tax is paid via filing the Form 709 (unless you surpass the $12.92 million limit). It is a record so that when you pass on, the IRS knows if and by how much this $12.92 million has been reduced by taxable gifts.
I know this is confusing (I quite often have to refresh myself on how this works), but the Form 709 is an easy form and your CPA can do it unless you make extensive gifts of various categories (in this case your estate lawyer should get involved). Simple cash gifts that exceed the $17,000 are pretty straightforward and can be reported by your CPA. I hope you are lucky enough to be the recipient of such gifts by family !