Effective Jan. 1, 2018, the Tax Cuts and Jobs Act increased the estate, gift and generation-skipping transfer tax exemptions to $11,000,000 subject to future inflation adjustments. These increased exemptions are scheduled to sunset on Dec. 31, 2025. After President Biden won the 2020 presidential election many taxpayers made large gifts at the end of 2020 and during 2021 to utilize the larger exemption amounts in fear that the new administration would enact legislation that would reduce the exemptions prior to their scheduled sunset. Well, here we are in 2022 and the exemptions have not been lowered despite some legislative proposals to do so. In fact, instead of taxpayers having less exemptions now than they had during 2020 and 2021, the exemption amounts are currently higher due to the inflation adjustments for 2022. The inflation adjustment increases are as follows:

Estate, Gift and GSTT Exemptions: Each of the estate, gift and generation-skipping transfer tax exemptions have been increased for 2022 by $360,000 to $12,060,000 ($24,120,000 for a married couple).

Gift Tax Exclusion: The annual gift tax exclusion is increased to $16,000 for 2022.

Annual Exclusion for Transfers to Non-US Citizen Spouses: The annual exclusion amount for gifts to a non-US citizen spouse is increased to $164,000 for 2022.

The increases in the estate, gift and generation-skipping transfer tax exemptions means that taxpayers that have already used their full exemption amounts can make additional gifts of $360,000 ($720,000 for a married couple) during 2022.

For those taxpayers who have yet to use their increased exemption amounts, there appears to be time to still do so. The latest version of the Build Back Better Act did not contain a reduction in the estate, gift and generation-skipping transfer tax exemptions that was found in earlier versions. Based on the current climate, it does not appear that the reduction in exemptions will be in the final version of the BBBA. However, one never knows.