Estate taxes and gift taxes are something that most people in San Jose will not have to worry about. However, for those of greater wealth who are affected by estate taxes and gift taxes, the news that the tax exemption is going up in 2023 is welcome news.
Estate tax exemption up in 2023
The federal estate tax exemption for 2023 has risen to $12.92 million for individuals or double that for a married couple. This means that you can transfer up to that amount to your heirs without being taxed on the transfer. The federal estate tax exemption for 2022 sits at $12.06 million for individuals and double that for a married couple.
The gift tax limit has also gone up for 2023. Currently, you can give up to $16,000 to an individual without the gift being taxed. As of 2023, the gift tax limit has been raised to $17,000. These gifts do not count against your $12.92 million lifetime exclusion.
Payments made directly to schools for tuition or to health care providers can be made in any amount without it counting toward the gift tax or estate tax exemption.
Plan with estate tax in mind
If you have significant wealth, you will want to engage in estate planning with the estate tax and gift tax in mind. You likely do not want the size of your estate reduced, with a portion of it going to the Internal Revenue Service (IRS). With proper planning and the use of revocable trusts, irrevocable trusts, life insurance and a basic will, you can ensure that as much of your estate will be passed on to your heirs as possible.