The federal estate (and gift) tax exemption amount (exemption amount) is the total amount that an individual may transfer during life, or at death, without incurring gift, estate, or generation-skipping transfer tax on the value of the transferred assets.  This amount is adjusted annually for inflation, meaning that even if you exhaust your exemption amount by making substantial gifts in the current year, on Jan. 1, 2018, the inflation adjustment on the base $5 million exemption amount will become available for future gifting.

In 2018, the exemption amount will increase from $5,490,000 to $5,600,000 per individual (or $11,200,000 for a married couple) and individuals who have already used their entire exemption amount for lifetime gifting will have an additional $110,000 of exemption available as of Jan. 1, 2018.

The federal gift tax annual exclusion amount also will increase in 2018 from its current amount of $14,000 to $15,000 per donee.  Gifts to any recipient may be doubled if gifts are split with a spouse.  Unlike the exemption amount, the gift tax annual exclusion amount is a “use it or lose it” tax benefit.  You may make annual exclusion gifts to as many recipients in a year as you wish, but you may not carry the annual exclusion amount forward to the next year.

For further detail on 2018 tax benefits please see IRS Revenue Procedure 2017-58.

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