Gift and Estate Tax Exemptions for 2025

Each year, the IRS (and New York State) provides updated figures for estate and gift tax exemptions. The federal estate and gift tax exemption will be $13,990,000 per individual for 2025 gifts and deaths, up from $13,610,000 in 2024. The NYS estate tax exemption for 2025 will be $7,160,000 million, up from $6,940,000 in 2024.  In addition, the annual gift tax exclusion is increasing due to inflation. The exclusion will be $19,000 per recipient for 2025. Further, the annual amount that one may give to a non-citizen spouse will increase to $190,000 in 2025. If a person gifts an amount that is above the annual gift tax exclusion, that individual may use a portion of his or her lifetime exemption ($13,990,000 in 2025). The federal gift and estate tax exemption are linked, meaning that the use of one’s gift tax exemption will reduce the amount one may leave at death, estate tax free. If one makes gifts in excess of the annual gift tax exclusion, one must file a gift tax return, due April 15 in the following year, to report the gift and track the amount of the lifetime exemption that has been used.

For married couples, the $19,000 annual exclusion means that they can give $38,000 per year per recipient. As an example, if a married couple has three children and six grandchildren, they may transfer $342,000 in 2025 to their descendants without reducing their combined $27,980,000 gift tax exemption, thus allowing them to transfer further substantial assets free of gift taxes.

Generally, spouses who are both U.S. citizens may transfer unlimited amounts to each other without incurring any gift tax, as any assets in excess of the couple’s combined estate tax exemption ($27,990,000 in 2025) will be taxed at the death of the surviving spouse, and transferring assets to the survivor only defers the tax that the IRS will eventually collect.

Gifts to a non-US citizen spouse, however, are limited. Since a non-U.S. citizen spouse may not be subject to the U.S. estate tax, one cannot transfer unlimited assets to a non-U.S. citizen spouse since that transferred wealth could potentially avoid U.S. estate taxation upon the non-U.S. citizen spouse’s death. Thus, when the recipient spouse is not a U.S. citizen, and regardless of whether the non-U.S. citizen spouse is a resident or nonresident of the United States, the amount of tax-free gifts is limited to an annual exclusion amount. For calendar year 2025, the first $190,000 of gifts to a spouse who is a non-U.S. citizen are not included in the total amount of taxable gifts.

Although the federal lifetime estate and gift tax exemption will increase to $13,990,000 in 2025, that amount is set to be cut in half at the start of 2026 when the current tax law “sunsets” or expires (although many expect the current presidency and congress to affect this sunset provision). New York’s exemption is set to continue as is, with annual inflation adjustments but no major cuts or increases.

For a person who has already maxed out lifetime gifts, the increase in the federal exemption for 2025 means that he or she may give away another $380,000 in 2025. For a married couple who has already maxed out lifetime gifts, this means that they may give away another $760,000 in 2025.  The attorneys at Robert Bichoupan PC are available to discuss the effect of the 2025 exemptions on you and how they may be used to minimize your taxes.

Prior results do not guarantee a similar outcome. All information posted is general advice only, based upon the rules of NYS, and is not intended to be a substitute for personal legal advice. Although information provided here was accurate as of the date of posting, laws change frequently and rules in other jurisdictions may differ. Therefore, readers should not rely upon these postings but should consult an attorney to discuss their specific factual situation.