The Good News

In November 2019, the IRS made an important clarification: If you make large gifts between 2018 and 2025 (when gift tax limits are higher), you won't be penalized after 2025 when the limits drop back down.

What Are Gift and Estate Taxes?

These taxes only affect very wealthy people who:

• Give away large amounts of money or property while alive (gift tax)

• Leave large amounts to heirs when they die (estate tax)

How the Tax Reform Changed Things

Before 2018

You could give away about $5 million during your lifetime (adjusted for inflation) before owing gift taxes.

2018–2025 (Temporary Increase)

The Tax Cuts and Jobs Act doubled this amount:

• 2018: $11.18 million

• 2019: $11.4 million

• 2020: $11.58 million

• Amount continues to adjust for inflation through 2025

2026 and Beyond

The limit drops back to about $5 million (adjusted for inflation).

The Big Concern (Now Resolved)

People worried: "If I give away $10 million in 2024 when it's allowed, will I be penalized in 2026 when the limit drops to $5 million?"

The IRS Solution

The IRS created a special rule that protects you. Your estate gets to use whichever limit is higher:

• The limit when you made the gift, OR

• The limit when you die

Simple Example

Sarah's Story:

• Before 2018: Never made large gifts

• 2018: Gives away $9 million (allowed under the $11.18 million limit)

• 2026: Dies when the limit has dropped back to around $5 million

Result: Sarah's estate still gets credit for the full $9 million she gave away in 2018, even though the 2026 limit is lower.

What This Means for You

If you're wealthy enough to consider large gifts, you can take advantage of the higher limits through 2025 without worrying about future consequences. The tax benefit is locked in once you use it.

For more information, visit IRS.gov/taxreform.