Category Archives: 2022 federal and AZ taxes

2022 Estate & Gift Tax – Federal & Arizona

The federal estate and gift tax exemption rises to $12 million per individual for 2022 deaths, up from $11.7 million in 2021, according to Internal Revenue Service.  The gift tax annual exclusion will be $16,000 for 2022, up from $15,000. The new numbers mean that wealthy taxpayers can transfer more to their heirs tax free during life or at death. 

In 2022, an individual can leave $12 million to heirs and pay no federal estate or gift tax, while a married couple is exempt up to $24 million.  In 2025 this is scheduled to reduce to $5 million but is indexed to inflation, so the number will probably be $6.5 million or more — if Congress does nothing to change this.  Keep in mind that Arizona has no estate tax and no gift tax.

Someone can give away $16,000 to as many individuals—kids, grandkids, their friends or spouses—as that person would like with no federal gift tax consequences.  Spouses can each make $16,000 gifts, doubling the impact.  A series of $16,000 annual exclusion gifts can add up, and they don’t count toward the $12 million exemption amount.  Please note that gifts made from one spouse to the other are gift tax-free under separate marital deduction rules.

Even gifts that aren’t covered by the exclusion and are therefore taxable may not result in a tax liability. This is because a tax credit wipes out the federal gift tax liability on the first taxable gifts that you make in your lifetime up to the estate tax exemption limit.  However, to the extent you use this credit against a gift tax liability, it reduces or eliminates the credit available for use against the federal estate tax at your death.