Tax-free amount increases for 2025

The tax-free amount for estates and the gift tax exclusion amounts are indexed for inflation, so they adjust each January 1.  For a person dying in 2025, an estate tax return is required and estate tax may be due if the decedent’s estate exceeds $13,990,000.  This is a $380,000 increase over the 2024 tax-free amount of $13,610,000.

The gift tax exclusion amount is the amount a person may give to a donee without having to file a gift tax return.  The annual exclusion has increased to $19,000 per year starting in 2025 (up from $18,000 in 2024).

For married persons, it may be a good idea to file an estate tax return even if the estate does not exceed the tax-free amount.  Doing so allows the deceased spouse’s unused exemption amount to be assigned to the surviving spouse.  The surviving spouse can add the unused exemption amount to his or her own tax-free amount, increasing the amount of property which may be left to family when the surviving spouse dies.

Unless Congress changes the law, the tax-free amount will be cut in half for persons dying in 2026 or later.  Thus, it will be closer to $7,000,000.  See the blog entry “Avoiding falling off the 2026 cliff” below for more information. The election of a Republican President and Congress makes it more likely that the tax-free amount will not be cut in half.