The IRS has announced the 2021 inflation adjustments for many tax provisions, including exemptions for estate, gift and generation-skipping transfer taxes and the annual exclusion amount for gifts.
The federal lifetime gift tax exemption has been indexed for inflation and therefore increased from $11,580,000 in 2020 to $11,700,000 in 2021. Also, the generation skipping transfer tax exemption has also been indexed for inflation and therefore increased from $11,580,000 in 2020 to $11,700,000 in 2021.
The gift tax annual exclusion amount remained constant at $15,000 for 2021. This is the amount that each person can give to another person without using any gift and estate tax exemption. Payments of tuition to schools and medical expenses to health care providers do not count against either the $15,000 annual gift tax exclusion or the $11,700,000 gift and estate tax exemption.
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