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At the end of 2022, Congress passed over 90 changes to the tax code. On February 2nd, we held a Zoominar where I summarized the bigger changes that affect most people.
Here are some of the tax laws and limits not discussed in the Zoominar:
Gift Tax Exclusion Rises to $17,000
One of the most popular things for grandparents to do is to give money to their grandchildren. Regardless of the relationship you have with anyone, you are allowed to gift up to $17,000 this year without having to file a gift and estate tax return. This may be a much higher limit than you recall. For whatever reason, many of us remember a lower gifting limit. But the limit has risen to $17,000. A married couple may double this gift per recipient.
Lifetime Gift and Estate Exclusion Rises
When a person dies, the assets are stepped up to the fair market value on the date of death (or 9 months later). This makes life a lot easier for the executor of the estate. Furthermore, the amount of assets that can pass to beneficiaries is excluded from the estate tax as long as they are less than $12,920,000. A married couple who both pass away can pass twice that amount of money, $25.8 million, without an estate tax. The estate tax rate is 40%. These limits are at record highs, and set to expire in 2025, when many more people will be subject to the onerous estate tax.
Mortgage Interest Deduction
You may deduct up to $750,000 of your acquisition indebtedness. This means that the mortgage you used to purchase the home is a tax deduction up to $750k. Any mortgage amount above that is not a tax deduction. Importantly, a home equity line of credit is not a tax deduction. So, a mortgage taken out for home improvements is not a tax-deductible expense.
You can also look back at last week’s Periscope for more information on another tax law change for 2023.
