TAXABLE GIFT EXCLUSION RAISED TO $13,610,000
For 2024, the federal estate tax threshold is $13.61 million for individuals, which means married couples don’t have to pay estate if their estate is worth $27.22 million or less. For 2023, the threshold was $12.92 million for individuals and $25.84 million for married couples.
That is an incredible amount, especially considering the relatively low amounts in the not-to-distant past.
This means most estates can pass their real estate holdings without issue. For example, leaving a property worth $3mm to your children will have no estate taxes due, presuming the remainder of the estate is under the overall limits. For the most part, even ‘average’ homes in Newport Beach and Orange County can be passed without concern for taxes in 2024. This includes inheritance and gifting of homes (i.e. gifting while alive).
However, it is easy to imagine coastal real estate exceeding these values. Newport Beach and Orange County real estate features trophy properties that cannot be duplicated, including many eight-figure sales. The heirs of those properties may indeed have an estate-tax concern.
Beware however, Proposition 19 may cause a property tax increase. Review our detailed article and video on Prop 19 here.
Key to remember, these increased allowances sunset in 2026 absent further congressional action (i.e. they go way down in 2026 absent a change or update to the current law).
GIFT EXCLUSION RAISED TO $18,000
The IRS annual exclusion for gifts (the total amount exempt from reporting) is raised to $18,000 per person (up from $17,000 per person in 2023).
This often-misunderstood threshold is merely the limit at which the IRS requires reporting. In other words, anything above $18,000 per person merely requires reporting of the gift to the IRS. (IRS form 709.) However, as noted above, the limits at which any taxes are due are far greater.
CAN I SELL MY HOME FOR BELOW FAIR MARKET VALUE?
Indeed, many owners elect to gift or partially gift their homes to their children now, for many reasons, these current tax exemptions are often a factor.
Frequently, a sale at below fair market value can be easily (and legally) achieved to assist the child and/or allow ease of obtaining a new loan using a gift of equity to avoid any down payment. Yes, you can sell your home below fair market value.
Please review our in depth article and video here:
WHAT ARE CAPITAL GAINS AND WHEN DO I PAY THOSE?
See our article on capital gains and the IRS Section 121 exclusion here for more details:
– Devin Lucas
Author Devin R. Lucas is a REALTOR®, Real Estate Attorney and real estate Broker and specializing in Newport Beach, Costa Mesa and Orange County coastal communities, serving individuals, Trustees and investors in residential real estate.
Lucas Real Estate – Attorney Devin Lucas and CPA Courtney Lucas – are experts in residential real estate transactions, tax considerations, Trustee representation and California’s Proposition 19.
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