The Permanent Exemption: Maximizing Your Estate’s Tax Benefits
Undoubtedly, you want to keep your estate’s tax burden below 40%. Fortunately, every taxpayer has the right to use the lifetime exemption, often referred to as the “permanent exemption,” to lower their tax liability. The lifetime exemption amount was set at $5 million by the American Taxpayer Relief Act of 2012 (ATRA), with inflation adjustments made every year. However, new tax legislation that went into effect in 2018 boosted the lifetime exemption amount for that year and several years after. The exemption amounts are planned to return to the old $5 million exemption adjusted for inflation on January 1, 2026.
The individual lifetime exemption amount will rise to $12.92 million in 2023, a nearly $900,000 increase. Federal gift and estate taxes can be avoided by a married couple on a combined amount of $25.84 million, an increase of $1.72 million. To put those numbers in perspective, the boost stops Uncle Sam from losing assets worth $344,000 for a single person and $688,000 for a married pair.
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