2018 Estate and Gift Tax Adjustments


The federal estate, gift, and generation-skipping transfer tax exclusions are adjusted annually for inflation. On November 6, 2017, the IRS published the 2018 inflation adjustments in the Internal Revenue Bulletin No. 2017-45, which can be found here.

Effective January 1, 2018, the 2018 federal estate and gift tax exemption will be $5,600,000 per individual and $11,200,000 for married couples. The exemption amount has increased $110,000 from 2017’s exemption of $5,490,000 per individual and $10,980,000 for married couples. The federal estate and gift tax exemptions allow individuals to leave up to the exemption amount ($5.6 million) without paying estate tax on death and/or gift tax during life. The same exemption amount is used for generation-skipping transfer taxes, which are imposed on gifts made to grandchildren or those who are more than 37-1/2 years younger than the person making the gift.

In addition on January 1, 2018, the annual gift tax exclusion amount will be increased to $15,000 per recipient, up $1,000 from 2017’s annual exemption of $14,000 per recipient. Spouses can each gift up to $15,000 to the same recipient. Therefore, a married couple can gift $30,000 to each recipient without incurring gift tax. Payments made on someone’s behalf for qualified tuition or medical expenses do not count towards the annual gift tax exclusion.

Gifts to spouses who are U.S. citizens are not subject to gift tax. Gifts to spouses who are not U.S citizens are subject to gift tax. The annual exclusion amount for gifts to non-U.S. citizen spouses increased to $152,000 from $149,000 beginning January 1, 2018.

It is important to note that the above exclusion amounts and the federal estate and gift tax laws are subject to the GOP’s proposed tax reform plan, which as currently drafted, provides for the phasing out the federal estate and gift tax.

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