In 2024, the gift tax annual “sprinkling” exclusion amount will increase to $18,000 per donee (from its prior $17,000 amount in 2023).  This gift tax annual exclusion amount can be used without using the estate and gift tax exemption amount.  This means that a married couple can now gift together $36,000 to each of their children and grandchildren without using any of their combined $27,220,000 unified exemption amount.  Additionally, clients can make tax-free gifts in unlimited amounts for tuition, medical expenses, and health insurance premiums paid directly to the school and/or medical provider.  With the expected high inflation adjustments, this $18,000 gift tax annual exclusion amount will likely continue to increase in the future.  

EXAMPLE:  Two spouses have three (3) children and seven (7) grandchildren for a total of ten (10) potential donees to whom to make annual gifts.  With the increased gift tax annual exclusion to $18,000 in 2024, the parents can gift to their ten potential donees a total of $360,000 every year gift tax-free. [Above this amount, they would have to file a gift tax return].

THE FOLLOWING COPIED FROM IRS RELEASE:

Issue Number:    IR-2023-160

Inside This Issue

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IRS reminder: Make sure to understand recent changes when buying a clean vehicle

WASHINGTON — The Internal Revenue Service reminded consumers considering an automobile purchase to be sure to understand several recent changes to the new Clean Vehicle Credit for qualified plug-in electric drive vehicles, including qualified manufacturers and tax rules.

The Inflation Reduction Act of 2022 (IRA) made several changes to the new Clean Vehicle Credit for qualified plug-in electric drive motor vehicles, including adding fuel cell vehicles. The IRA also added a new credit for previously owned and commercial clean vehicles.

Before taxpayers purchase a clean vehicle they should be sure that the vehicle was made by a qualified manufacturer. Taxpayers must also meet other requirements such as the modified adjusted gross income limits. [Single $150k and married joint $300k].

To be a qualified manufacturer, the manufacturer must enter into an approved agreement with the Internal Revenue Service and supply the IRS with valid vehicle identification numbers (VINs) that can later be matched at the time of filing to the VIN reported on the return.

When purchasing a new or used clean vehicle, purchasers should check if the make and model are eligible. In addition, for a new or used clean vehicle to be eligible for a Clean Vehicle Credit, the seller must provide the buyer with a seller report verifying that the vehicle purchased will qualify for the credit, which will include the make, model, and VIN.

Also, the clean vehicles tax credits are non-refundable tax credits meaning that these credits can’t be used to increase the taxpayer’s tax refund or to create a tax refund. These credits will only reduce the amount of tax they owe.

The amount of tax owed will determine if the full amount or only a portion of the credit can be claimed.

For more information on these credits and other clean energy credits related to the Inflation Reduction Act, check Credits and Deductions Under the Inflation Reduction Act of 2022.