The IRS Annual Gift Exclusion will increase from $16,000 in 2022 to $17,000 for calendar year 2023. The annual exclusion amount is the amount that an individual can give to another individual in a calendar year without paying any gift taxes or even having to file a gift tax return. Any amount over the limit would require the filing of a gift tax return, although the return may or may not result in gift tax being owed.
It is also possible for a married couple to engage in gift-splitting to give an individual more than the annual limit. For example, two spouses can each give a single individual $16,000 for 2022 ($32,000 total) and $17,000 for 2023 ($34,000 total).
As we approach the end of the year, it is important to review your current and future gifting strategies. For example, if you expect to gift your child $30,000 to help with a down payment for a house in 2023, it may be more beneficial to split the gift between two years (such as $15,000 in 2022 and the remaining $15,000 in 2023 when needed) so that you can avoid complicating your tax filing requirements for 2023.
As a reminder, a valid completed gift is irrevocable. Therefore, it is important to review your financial situation and tax planning strategies before making any gifts.