2025 Federal Estate and Gift Tax Limits

Recently, the Internal Revenue Service (“IRS”) announced the 2025 estate and gift tax exemption amounts.  Generally speaking, these amounts change slightly each year, and are an important consideration in a person’s estate planning process.

Background

As we have discussed numerous times on this blog and our Ag Law in the Field Podcast, Congress sets an amount of assets that a person is allowed to give during their lifetime or at death without incurring estate or gift tax liability. This is known as the lifetime exemption.  The IRS adjusts the amount each year for inflation. Persons whose estate value is over the lifetime exemption will incur federal estate tax liability of 40% on the overage.

Additionally, federal tax law allows each taxpayer to gift a certain amount to another individual without incurring federal gift tax liability.  This amount is critical for anyone utilizing gifting as part of their estate planning strategy.

[For more information on these taxes, read prior blog posts here and here and listen to prior podcast episode here.]

2025 Limits

For 2025, the lifetime exemption amount will be $13.99 million, an increase of $380,000 from the 2024 exemption.  For a couple, that equates to $27.98 million.  The federal gift tax limit will increase from $18,000 to $19,000.

What happens in 2026?

At least as the law currently stands, a big change will be coming in 2026.  The lifetime exemption is set to drastically decrease as it will sunset back to prior exemptions in 2026.  The estimated lifetime exemption for 2026 will be $7 million/person.  Congress should certainly act to change this by extending the current exemptions or passing a new law, but for now, the decrease is set to go into effect on January 1, 2026.

What does this mean for me?

Estate and gift taxes are an issue of which everyone should be aware.  Everyone should have an idea of the fair market value of their estate.  This is a critical first step in determining if someone could be facing an estate tax issue.  Anyone who is even close to the lifetime exemption amount should be carefully planning their estate to seek to avoid this tax liability.

Additionally, people should take care when making gifts, whether monetary or of assets, and understand what gift tax implications those gifts may have.  It should also be noted that gifts made over the annual limit will likely result in a decrease in the lifetime exemption a person has in the future.

The best advice is to work with an attorney and an accountant to ensure there are no surprising tax issues that arise.