This is it. The all time high limits of the IRS Gift and Estate Tax Limits are $13,990,000 in 2025 for the lifetime exclusion (i.e. total amount that can be passed tax free) and $19,000 in 2025 for the Annual Gift Exclusion (i.e. amount that does not need to be reported).
However, these figures are scheduled to revert to much lower levels in 2026 unless Congress takes action to extend or modify the current allowances.
Thus, 2025 presents a prime opportunity to transfer real estate or make substantial gifts before the pending rule changes take effect.
TAXABLE GIFT EXCLUSION AND ESTATE TAX THRESHOLD RAISED TO $13,990,000
For 2025, the taxable gift exclusion or federal estate tax threshold is $13.99 million for individuals, and $27.98 million for married couples. These limits are throughout an individual’s lifetime and can include gifts made while alive, as well as the inheritance they leave at death. A partial gift now, while alive, will then count towards this total lifetime allowance finalized at death.
What does this mean? Quite simply, this means an individual can gift, either while alive, or at death (i.e. via their estate, trust, etc.), a total of up to $13.99 million for individuals, and $27.98 million for married couples, without any estate taxes due. Amounts above these thresholds will be subject to estate taxes.
That is an incredible amount, especially considering the relatively low amounts in the not-too-distant past.
This allows many estates to transfer real estate holdings without incurring estate taxes. 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. In 2025, even ‘average’ homes in Newport Beach and Orange County can typically be passed on without estate tax concerns.
However, it is easy to imagine coastal real estate exceeding these values, coupled with other potential savings, stocks, and other investments. 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.
What about spouses? There is no threshold on gifts or inheritance to one’s spouse, but for those that may exceed these thresholds, careful estate planning may be prudent to take advantage of these high limits now.
Who pays if a tax is due? The person making the gift (or the person’s estate if they have died) is responsible for the tax. The person receiving the gift does not actually pay any taxes. However, the IRS can attach liens and seize property if taxes were not paid. So while a child that inherits a $50mm house may not per se be responsible for the estate’s taxes, if the taxes due cannot be paid, the house may be fair game for forced liquidation to pay the taxes due. And since the IRS is unlikely to care about achieving a top dollar sale, the child is likely far better off selling the home in advance of any such issues.
A few examples:
Example 1 – an individual passes away with $1mm in cash, stocks and other savings, and a $3mm house, for a total estate of $4mm, left to his two children. The entire inheritance would not be subject to any estate taxes since it is well below the threshold. The heirs would inherit the entire amount, tax free.
Example 2 – an individual, while alive, gifts a $3mm house to his daughter. The entire gift would not be subject to any estate taxes since it is well below the threshold. The daughter would inherit the entire property, tax free. (HOWEVER, due to Prop 19, the property taxes on the real estate would likely increase and the daughter would lose the valuable step-up in basis, as discussed in other articles).
Example 3 – an individual passes away with $10mm in cash, stocks and other savings, and a $10mm house, for a total estate of $20mm, left to her three children. Only the $13.99mm would pass tax-free, the remainder ($6.01mm) would be subject to estate taxation.
Beware however, Proposition 19 may cause a property tax increase on the real estate (the amount due each year to the county). 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).
ANNUAL GIFT EXCLUSION INCREASED TO $19,000
The IRS annual exclusion for gifts (the total amount exempt from reporting) is raised to $19,000 per person (up from $18,000 per person in 2024 and $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 $19,000 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.
A few examples:
Example 1 – an individual gifts $10,000 to her son to help with rental payments. No reporting is required to the IRS.
Example 2 – Mother gifts $15,000 to her son to help with rental payments. Father also gifts $15,000 to the same son to help with rental payments. No reporting is required to the IRS. Even though the total gift of $30,000 exceeds the $19,000 exclusion, since the per person amounts ($15,000 each) were below the $19,000 exclusion, no reporting is required.
Example 3 – an individual gifts $100,000 to her daughter to help with a down payment on a home. A reporting IS required to the IRS. However, since this amount is well below the $13.99mm threshold for taxation, no taxes are due on this gift, it simply must be reported. In this case, the $100,000 will be added to the individual’s lifetime exclusion amount, and thus essentially reduce the total threshold for the remainder of the inheritance, so that if the same individual were to die in 2025, the total threshold is now $13.89mm.
Contact Lucas Real Estate Today
Lucas Real estate specializes in assisting Trustees with real property. Devin Lucas is Real Estate Broker, Real Estate Attorney, and REALTOR®, Courtney Lucas is a CPA and REALTOR®. Together, they are experts in California Real Estate sales, capital gains issues and property tax matters including Propositions 13, 58, 193, 60, 90 and new Proposition 19.
If you’re preparing to sell property in Newport Beach, Costa Mesa, or nearby communities like Huntington Beach or Laguna Beach, trust Lucas Real Estate to handle your transaction with precision and professionalism. From understanding taxation issues, to disclosure exemptions to fulfilling your obligations, we ensure a smooth and compliant sale.
For more insights and professional real estate services in Newport Beach, Costa Mesa, and the coastal areas of Orange County, contact Lucas Real Estate today. Let us guide you through your next property transaction with confidence and clarity.
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– Devin Lucas
Author Devin R. Lucas is Real Estate Professional – a Real Estate Broker, Real Estate Attorney, and REALTOR® – specializing in Newport Beach, Costa Mesa and Orange County coastal communities, serving individuals and Trustees in residential real estate.
Lucas Real Estate – Attorney Devin Lucas and CPA Courtney Lucas – are experts in California Real Estate sales, capital gains issues and property tax matters including Propositions 13, 58, 193, 60, 90 and new Proposition 19.
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