It’s rare for our Geyer Law estate planning clients to be happy to hear from the U.S. Internal Revenue Service, but just over a week ago, many had reason to be. The smile-inducing news came in the form of an announcement that in 2025, not only would the estate and gift tax exemptions be increasing, but there is going to be a higher standard deduction for income tax purposes as well.
How will things work, exactly?
- The estate tax exclusions will rise from $13.61 million to $13.99 million.
- The annual exclusion for gifts will go from $18,000 (per recipient) to $19,000.
- The standard deduction for income tax will go from $13,600 to $14,000 for individuals, from $22,000 to $30,000 for couples filing jointly, and from $21,900 to $22,500 for heads of household.
There were added good-news aspects to the message, with increases in:’
- the alternative minimum tax exemption
- the foreign earned income exclusion
- the deductible for individuals with Medical Savings Accounts.
While we offer no tax advice at Geyer Law, we’ve found that tax planning and estate planning (including charitable gift planning) often go hand in hand. As just one example, if your assets include IRAs and also real estate and other assets held outside the IRA, it can make sense to name a charity as beneficiary of the IRA accounts, with the “nonqualified” assets going to your heirs in your estate planning. The charities pay no income tax, leaving the children assets which are not subject to tax unless there is a gain on the sale of investments or real estate between your date of death and the time the asset is sold.
Meanwhile, we’re enjoying watching our clients enjoy the IRS message. Could that old statement often used to express cynicism – “We’re from the government, and we’re here to help” actually be coming true?
– by Kristina Shover, Associate Attorney with Rebecca W. Geyer & Associates
