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End of Year Gift Tax Planning

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The holiday season is a time of generosity and giving, and many of us feel a strong desire to support and uplift those we care about. Beyond the joy of seeing loved ones benefit from your generosity, gifting can also be a strategic way to reduce your taxable estate. With thoughtful end of year gift tax planning, you can align your personal motivations for giving with strategies that maximize the tax advantages of your gifts. Let’s take a closer look at the gift tax rules at the federal and state levels.

In 2024, the federal annual exclusion allows any individual to gift up to $18,000 to another person without the need to file a gift tax return. There is no additional gift tax established for Maryland residents in 2024. So, the tax benefit can be substantial from an estate tax planning perspective. The reason is that Maryland has an estate tax exclusion of $5 million for decedents dying in 2024. This means that anything over $5 million in their estate at death will be taxed at a rate of 16% on the excess. So, take an individual with $6,000,000. If they give away $1.5 million as a gift, they now have $4.5 million. If they pass away, their estate will be below the estate tax exclusion and there will be no estate tax due.

Taxes can get more complex at the federal level. Federally, everyone has a lifetime estate and gift tax exclusion of $13.61 million in 2024. This means that you can give away $13.61 million either during life, death or both exempt from taxes.

So where does the $18,000 federal exclusion come in? Well, if you make a gift more than $18,000 to any individual you need to report it to the Internal Revenue Service (IRS) using a gift tax return. If you do that, the IRS will reduce that lifetime exemption by the amount of the gift. Our example before, if you give away $1.5 million now your estate tax exclusion is $12.51 million. This isn’t a problem if you have $4.5 million remaining in your estate like the example above.

However, for those that either don’t want the hassle of filing the gift tax return, or they don’t want to reduce their estate tax exclusion, they should keep gifts below the annual limit that is free of reporting ($18,000 in 2024).

The end of the year can be a great time to make larger gifts because you can gift $18,000 in December 2024 and then another $18,000 in 2025 essentially doubling the impact of your gift.

Contact Annapolis Estate Planning Attorneys

By combining the joy of giving with smart gift tax planning, you can make a meaningful impact while protecting your estate for future generations. If you’re ready to explore gifting strategies tailored to your goals, reach out to the experienced Annapolis estate planning attorneys at Sinclair Prosser Gasior for personalized guidance.

Jon J. Gasior, Estate Planning Attorney
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About Jon J. Gasior, Estate Planning Attorney

His personal experience with family and the problems that resulted from their failure to create an estate plan resulted in his desire to learn more about this area of the law. From his work in the Elder Law Clinic, he further realized the need to plan not only for death, but also for incapacity during their lifetime. About the Author !