$16,000 per year per recipient
The annual federal gift tax exclusion for 2022 is now $16,000, up from $15,000 where it was for the past several years. What this means is that you can gift up to $16,000 in 2022 per person tax-free without using up any of your lifetime gift and estate tax exemption which is now $12.06 million. For married couples, this means they can give $32,000 per year per recipient beginning this year.
$12.06 Million Lifetime Limit
In addition (and as noted above), the estate and gift tax exemption lifetime cap is now $12.06 million per individual, up from $11.7 million in 2021. For a married couple, this increase means they can shield a total of $24.12 million without having to pay any federal estate or gift tax. For couples who have already reached the lifetime gift limit, this means that they may now "gift" another $720,000 in 2022 tax free. However, it is critical that your estate plan be drafted to take advantage of these tax savings, especially as it relates to married couples.
Keep in mind that gifts that exceed $16,000 to a single person in any given year may also be tax free, but will trigger the need to file a federal gift tax return (Form 709) as you will be eating into your lifetime exemption.
No Estate Tax in New Jersey
And for those of us who live in New Jersey, there is no longer an “estate” tax (eliminated in 2018), but there is still an Inheritance Tax that applies in certain cases, but that's a discussion for our next blog!