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Thinking Ahead: Estate and Gift Tax Changes and Business Valuation Services

January 22, 2024

2024 is here! – you may be making plans to meet fitness and health goals, plan family vacations or buy a new car. While family and estate planning might not be on that list, it’s crucial to think about with a new year upon us.

Happy New Year! There are a few changes on the horizon that you may consider in your tax planning and discussions with family members.

Estate exemption provisions are NOT here to stay!

The Tax Cuts and Job Act (TCJA) estate exemption provisions are set to expire on December 31, 2025.

That may seem like a long time away, but two years is a short amount of time to prepare for gifting over $12 million. As of fall of 2023, the individual lifetime exemption gift amount was approximately $12.92 million, and for couples, $25.84 million. On January 1, 2026, this amount may be cut in half, to $7 million and $14 million respectively*. (*Estimated – TBD by IRS)

That’s the big picture, sure – but what does this actually mean for me and my family?

As of January 1, 2024, married couples can make gifts up to approximately $27.22 million dollars until the cutoff date. There is no concern for “claw-back” - The IRS won’t retroactively make you pay taxes on this amount. Now is the time to make the gift you have been thinking about making.

Let’s look at the numbers.

For 2023, you could gift up to $17,000 per person and in 2024 this amount jumped to $18,000, without the giver or receiver paying income taxes or eating into your lifetime exemption.

The TCJA expiration date changes the lifetime gift and estate exemption back to 2017 amounts as follows:

Lifetime estate and gift exemption thresholdsYou are here
Prior to TCJA2017 TCJA2023 (Adjusted for Inflation)2024Starting 1/1/2026
Individuals$5.6 million$11.18 million$12.92 million$13.61 million*$7.0 million
Couples$11.18 million$22.36 million

$25.84 million

$27.22 million*$14.0 million

*Estimated, after indexed for inflation

What about RI and MA estate tax?

Massachusetts’ estate tax exemption was increased to $2 million in 2023 (remains the same until 2026). Rhode Island’s estate tax for 2024 increases to $1,774,583.

How can a business valuation help?

If you’re a business owner, you can take advantage of the current lifetime exemption limit by gifting an ownership interest in your business. This could be a percentage of ownership, shares, etc. In order to do that, the IRS requires a business valuation to accompany the gift tax return. A valuation can also help you determine the value of your business for other reasons as well, such as for a potential sale, insurance for shareholder buy-sell agreements, and many other reasons. A valuation report can provide you with an independent view of your business, including identifying strengths, weaknesses, and growth potential. A valuation can also provide insights as to how your company compares to its competitors and possibly assist you in developing a strategic plan to increase your company’s value.

Want to learn more about KLR’s business valuation services? Contact us.

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