2023 Tax-Free Amounts

The tax-free amount for estates and the gift tax exclusion amounts are indexed for inflation, so they adjust each January 1.  For persons dying in 2023, if their estates exceed $12,920,000, an estate tax return is required and estate tax may be due.  This is an $860,000 increase over the 2022 tax-free amount of $12,060,000.

The gift tax exclusion amount increases to $17,000 for gifts made in 2023, up from $16,000 for 2022.

Beginning for persons dying in 2026, the estate tax-free amount will be cut in half unless Congress changes the law before then.  Thus, after 2025, the tax-free amount will be closer to $6,500,000, although the exact amount is not now known due to the inflation adjustment.  This creates an estate planning problem – or opportunity – between now and the end of 2025.

For married persons, even if the estate of the first spouse to die is less than the tax-free amount, an estate tax return may be a good idea for portability purposes.  If a return is filed, the unused exemption amount can be assigned to the surviving spouse and added to the surviving spouse’s own tax-free amount.  Because of the scheduled halving of the tax-free amount in 2026, filing a return and claiming the unused exemption amount could be important to save future taxes.