The federal estate tax exemption is set to increase to $13.99 million per person in 2025. This means federal taxes will not apply to estates until they exceed this threshold. Married couples can double this amount, shielding nearly $28 million from federal estate taxes.
However, this higher exemption will expire at the end of 2025 unless Congress acts to extend it. If the law sunsets as planned, the exemption could be significantly lower starting in 2026. The annual gift tax exclusion will also increase 2025 to $19,000 per donee, up from $18,000 in 2024.
This allows individuals to give up this amount to as many recipients as they like without counting toward their lifetime estate tax exemption. Married couples can combine their exclusions for $38,000 per recipient. While 2025 increases the estate tax exemption, a more significant shift could occur in 2026.
Estate tax changes in 2025
The Tax Cuts and Jobs Act of 2017 significantly raised the federal estate tax ceiling, but its provisions expire at the end of 2025. If the exemption reverts to pre-2017 levels, estates above roughly $5 million per person could face federal estate taxes again, although the figure would likely be adjusted for inflation.
Several states are also changing their estate and inheritance taxes in 2025. New York’s estate tax exclusion will increase to $7.16 million, up from $6.94 million in 2024. Connecticut’s estate tax exemption will mirror the federal exemption, rising to $13.99 million in 2025.
Maine’s estate tax exemption will increase to $7 million, up from $6.8 million in 2024. Rhode Island’s estate tax exemption will increase slightly from $1.77 million in 2024 to $1.8 million in 2025. Iowa is eliminating its inheritance tax.
Understanding these changes will be crucial for those planning their estates or expecting an inheritance in the coming years. It is important to stay informed and work with estate planning professionals to ensure your wealth is protected and distributed according to your wishes.
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