Posted on Jan 02, 2024

federal tax update

Key Federal Tax Updates for 2024 Estate Planning

As we step into the new year, this Federal Tax Update provides essential federal tax information related to estate planning for 2024. It's crucial to stay informed about these updates as Congress may introduce changes throughout the year. Before making any decisions regarding transfer tax planning, we recommend reaching out to your estate planning attorney for personalized advice.

Key Tax Highlights for 2024:

  1. Lifetime Exclusion Increase: Effective January 1, 2024, the federal gift and estate tax exclusion amount, along with the GST tax exemption, have risen to $13,610,000 per person, or $27,220,000 for a married couple. This presents new gifting opportunities, even for those who have utilized their full lifetime exclusion amounts in the past.

  2. 2025 Exclusion Amounts: However, these lifetime exclusion amounts are set to decrease at the end of 2025. Starting January 1, 2026, the base amount will be $5,000,000, plus an inflation adjustment. Planning ahead is crucial, as it's a "use it or lose it" scenario. If gifting part or all of your lifetime exclusion amounts is a consideration, beginning the planning process now ensures thorough consideration of options.

  3. Annual Exclusion Increase: As of January 1, 2024, the federal gift tax annual exclusion amount has risen to $18,000, or $36,000 for a married couple. This allows individuals to gift this amount per recipient per calendar year without utilizing any lifetime exclusion amounts or incurring gift tax.

  4. Tax Rates for Estates and Trusts: The highest federal estate, gift, and GST tax rate remains at 40% for 2024. The highest federal income tax rate for estates and non-grantor trusts is 37% for 2024, applicable to taxable income over $15,200 earned in tax year 2024.

  5. Estate Tax Portability: The ability to transfer a decedent’s unused federal estate tax exclusion amount to the surviving spouse (portability) remains in effect for 2024. If your spouse passed away within the last five years and this election was not made, it's advisable to contact us regarding the possibility of making the election now.

  6. Required Minimum Distributions (RMDs): The applicable age for starting RMDs for qualified retirement plan accounts is now 73 for individuals who turn 72 after December 31, 2022. This age will change to 75 as of 2033 for individuals who attain age 74 after December 31, 2032. It's essential to confirm the impact of these changes on your situation and consult with your plan administrator or financial advisor for guidance on computing RMDs for 2024.

As the new year unfolds, now is the perfect time to prioritize your estate plan. Take proactive steps by booking a Strategic Planning Session with us to ensure you make informed decisions aligned with your financial goals and the latest federal tax updates. 

Read the full news article here.

To schedule your Strategic Planning Session, please call our office at 978-494-5036!