2018 Inflation Adjusted Transfer Tax Exclusions and Exemptions

On October 19, 2017, the IRS published in Rev. Proc. 2017-58 inflation adjusted exemptions and exclusions from the Federal gift, estate and generation-skipping transfer taxes, which are summarized in the following table:

Inflation Adjustments for Federal Transfer Tax Exclusions and Exemptions
2017 2018
Gift Tax Annual Exclusion $14,000 $15,000
Estate and Gift Tax Lifetime Exemption $5,490,000 $5,600,000
GST Exemption $5,490,000 $5,600,000
Annual Exclusion for Gifts to Non-Citizen Spouse $149,000 $152,000


The gift tax annual exclusion increased from $14,000 to $15,000, allowing married couples to gift up to $30,000 per donee in 2018.

The lifetime exemptions from the Federal gift, estate and generation-skipping transfer taxes increased $110,000 from $5,490,000 to $5,600,000.  Because the amount of unused lifetime exemption can be ported to the surviving spouse, a married couple with an estate of up to $11,200,000 can avoid transfer tax.

The annual exclusion for gifts made to non-citizen spouses jumped from $149,000 to $152,000.

These adjustments reflect a more significant increase in the cost of living than we have seen in recent years.  The last adjustment to the Federal gift tax annual exclusion was 5 years ago in 2013.  Prior to 2013, a typical cost of living adjustment, which is made only in $1,000 increments, took 3 or 4 years.  With respect to the lifetime exemption from the Federal gift, estate and generation-skipping transfer taxes, the inflation adjustments for the last 2 years were $40,000 (from 2016 to 2017) and $20,000 (from 2015 to 2016).  We’ll see if this trend continues in 2019, or if the heavily publicized tax code overhaul affects these inflation adjustments.

About the Author:
Matthew J. Ahearn is Board Certified in both Wills, Trusts & Estates and Tax Law by The Florida Bar Board of Legal Specialization. He has extensive experience in the areas of estate and business succession planning, asset protection planning, charitable planning and planning to minimize or avoid wealth transfer taxes. Mr. Ahearn handles all aspects of probate and trust administrations, including estate and gift tax audits before the Internal Revenue Service. He represents both beneficiaries and fiduciaries in contested matters. He may be reached at mahearn@deanmead.com.