Estate tax exemption is the latest buzzword for 2025, which allows a majority of taxpayers to protect themselves, especially their wealth, from federal and state taxes. Here is everything you need to know about what estate taxes look like in 2025.
1. The Limitations on Gift Taxes
When you give something to someone without receiving something of value in return, it is a gift. However, what is counted as a gift is anything that has value, such as a car, a vacation, etc. If you give something to someone, it is essentially a transfer of wealth. The government wants to collect a tax from this activity. It is the giver of the gift who has to pay the taxes, as a gift is not income.
Depending on the value that was given, the tax can be anywhere between eighteen and forty percent. These rules were for last year. For this year, you can give a gift that is worth up to nineteen thousand dollars, and you don’t have to tell the IRS or pay a tax.
In 2025, spouses are considered separate givers. Gifting like this is also used in the context of estate planning, where someone might want to reduce the size of their estate for federal estate tax purposes.
2. What Happens If You Want to Give More than Nineteen Thousand?
Now, if you want to give more than nineteen thousand dollars in a calendar year, you can do so. However, you must tell the IRS about it. To avoid the tax on the amount, you can apply that gift towards your lifetime gift tax exclusion amount, which is your estate tax exemption amount.
3. New Rules for Estate Tax
If the gift tax is how much you can give to someone in a year during your lifetime without paying a tax, then the estate tax limit is the amount that you can pass on as an inheritance after death without your heirs having to pay a tax. The estate tax is also sometimes called the death tax, and this is the tax on your total estate that reaches above a certain threshold after you die.
But before it is distributed to your potential heirs and beneficiaries, the exclusion amount is the amount that your estate can be worth, such as assets and real estate. You will have to pay a forty percent tax on anything that is above the specified limit, which is 13.9 million dollars in 2025.
4. You Are More Likely Exempt
If you are one of the majority of Americans, it means that you don’t have a fourteen-million-dollar estate, which is why your estate tax will not be owed if you pass away in 2025. Check out the list of states with estate taxes 2025 so that you know what the exclusive rules for your respective state are.
You can also get in touch with Creative Planning and get the financial help you need to get a clear picture of the overall value of your assets.
5. Understand the Importance of Estate Planning
Things related to estate planning and taxes can be complex, which is why we recommend that you plan in advance and with the assistance of professional experts who can help you navigate the entire process. We recommend that you call a few financial advisors who serve in your respective state. With the introductory calls, you will get a better idea about which financial advisor you want to work with.
