Increase in Annual Gifting Amount to $19,000 Per Individual
For residents of Summit who are thinking about estate planning and how assets should be distributed to family members and other loved ones, it is important to consider the possibility of making some of those gifts during your lifetime. You might have adult children who could use your assistance now with the purchase of a home, for example, rather than leaving that money to them in an inheritance years down the road. If you do plan to give a substantial gift to an adult child or to another loved one in the present, it is important to talk with an estate planning lawyer in Summit about how your gift will be taxed. While New Jersey does not have a state gift tax, there is a federal gift tax that you will need to take into account.
The gift tax limit was recently raised to $19,000 per individual for 2025. We can provide you with more information about the practical implications of this increase in the annual gift tax limit.
Understanding the Federal Gift Tax
When you give a gift (according to the IRS’s definition) to another person or entity, that gift may incur a “gift tax.” The IRS defines a gift as “any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.”
The IRS emphasizes that the “general rule is that any gift is a taxable gift,” but there are exceptions you should know about. First, there is a gift tax limit or exclusion amount, which is the amount that increased to $19,000 per individual for 2025. We will explain how this works in greater detail below.
Aside from the annual exclusion for the calendar year, the following types of gifts are also excluded from the definition of taxable gifts:
- Educational or tuitions expenses you paid for someone else;
- Medical expenses you paid for someone else;
- Gifts to a spouse; and/or
- Gifts to a political organization.
New Gift Tax Limit for 2025
The annual gift tax exclusion for 2025 has increased to $19,000 per individual (up from $18,000 per individual in 2024). What does this allow for in practice? In short, an individual can gift up to $19,000 in money or an asset to another party without having to pay a gift tax on that amount.
Since that $19,000 annual exclusion applies to an individual, a married couple can double the amount. In 2025, that means a married couple can gift up to $38,000 to an adult child or another party without worrying about the gift tax.
Contact a Summit Estate Planning Attorney
If you are planning to make a monetary gift or other type of gift to a family member, friend, charity, or other party or entity, it is important to discuss the details with an estate planning lawyer. One of the experienced New Jersey estate planning attorneys at Dempsey, Dempsey & Sheehan can discuss any questions or concerns you have about gift taxes, as well as other related issues. Contact us today to learn more about how we can assist you.
Source:
irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
