Each year, certain estate, gift, and generation-skipping transfer (“GST”) tax figures are subject to inflation adjustments that go in effect on January 1. Below are the current adjustments for 2024.
Federal
The federal estate, gift, and GST tax exemptions for U.S. citizens and those domiciled in the United States have increased to $13,610,000 per taxpayer, an increase from $12,920,000 in 2023.
The federal estate, gift, and GST tax rate remains at flat 40% on the excess.
The federal gift tax annual exclusion amount has increased from $17,000 to $18,000 per donee. The exclusion for gifts to non-citizen spouses has increased from $175,000 to $185,000.
It is important to note that the increased federal exemption amounts scheduled to expire on December 25, 2025, under the 2017 Tax Cuts and Jobs Act. Absent legislative changes, the exemptions will revert to $5,490,000 per taxpayer, indexed for inflation to approximately $6.5 to $7 million. As this is an election year, we will be monitoring the political landscape and continuing to advise our clients to consider making large gifts now to take advantage of the higher exemptions available.
States
Connecticut: The Connecticut estate and gift tax exemptions match the federal estate and gift tax exemption amount of $13,610,000 per taxpayer. The Connecticut exemption will continue to match the federal exemption, whether it increases or decreases, going forward. Connecticut’s tax rate on estates or gifts in excess of the Connecticut exemption is 12%.
Massachusetts: Massachusetts passed a new law in October 2023 that provides for an estate tax credit amount of $99,600, making the estate tax threshold $2 million (up from $1 million). The law was retroactive, applying to estates of decedents dying on or after January 1, 2023. The Massachusetts credit amount is not indexed for inflation, and will remain fixed unless modified by future legislation. The Massachusetts estate tax rate is graduated, beginning at 7.2% and capping at 16%. The top bracket applies to taxable estates of $11 million and over. While Massachusetts does not impose its own gift tax, it does factor in lifetime gifts in calculating a Massachusetts decedent’s available estate tax exemption.
New Hampshire: New Hampshire does not impose an estate, inheritance, or gift tax.
New York: The New York estate tax exemption for decedents dying in 2024 has increased to $6,940,000 (from $6,580,000). Estates larger than the New York estate tax exemption amount are subject to a “cliff,” meaning that estates worth between 100% and 105% of the exemption amount will get a decreasing benefit from the exemption, and estates larger than 105% of the exemption amount will receive no exemption from New York estate taxes. The highest New York estate tax rate is 16%. While New York does not impose a gift tax, it will add back into an estate the value of nearly all gifts made by a decedent within a three-year period of his or her death for purposes of calculating New York estate tax liability.
Rhode Island: The Rhode Island estate tax credit amount for decedents dying in 2024 increased to $83,370, making the estate tax threshold $1,774,583 (up from $1,733,264). The Rhode Island estate tax rate is graduated, starting at 0% and capped at 16% for taxable estates exceeding $10.04 million. Rhode Island does not impose a gift tax.
In this alert, we have only briefly covered the estate and gift tax updates for 2024. With the increased federal and state exemptions, we remind clients that 2024 will prove to be a critical year to consider making large gifts and transfers of appreciated assets in advance of the 2026 sunset. Additionally, trust planning for married couples is still recommended and required to maximize the use of federal and state estate tax exemptions for each spouse.
