New Exemption and Annual Exclusion Amounts for 2022
With all the excitement surrounding possible tax law changes it may have been easy to miss the fact that the IRS announced several changes that become effective on January 1.
The annual exclusion amount will increase for the first time in four years moving from $15,000 per person per year to $16,000 per recipient for 2022. This is the amount you can give another person without using any of your lifetime gift exemption.
The annual amount a person may give to a spouse who is not a US citizen will increase to $164,000. Spouses who are both US citizens may generally transfer unlimited amounts to each other without incurring any gift tax.
The estate and gift tax exemption will be $12.06 million per individual for 2022 gifts and deaths, up from $11.7 million in 2021. The exemption applies to gifts in excess of the annual exclusion amount. A married couple can have a net worth of $24.12 million without having to pay any federal estate or gift tax. If you already maxed out your lifetime gifts, you now have an additional $360,000 you can give away in 2022.
While these changes are good news, it is important to keep in mind that even though the IRS has announced this increase, the exemption amount is still set to be cut by half (or more) at the start of 2026 in accordance with 2017 tax law changes.
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.