2023 Tax Update – Federal and Colorado Changes

With inflation hitting the US and World hard the last couple of years, changes to tax rates were expected and as always bring some benefits and some detriments.  Here are the latest numbers for the major taxes involved with estate planning and administration. 

Lifetime Estate and Gift Tax Exemption

With the New Year brings an increase in the U.S. estate and gift tax exemption. The new exemption will be $12.92 million per individual for 2023 gifts and deaths, up from $12.06 million in 2022.  Keep in mind this rate doubles for married couples, who can now have a combined $25.84 million before any federal estate tax will be due.

Annual Gift Tax Exclusion

This year the annual gift tax exclusion will be increase again by another $1,000 per recipient to a total of $17,000 per recipient or $34,000 per individual from a married couple. 

The annual gift tax exclusion is the amount under which a gift may be given tax-free without counting towards or using up any of the givers lifetime gift or estate tax exemption. For example, Mrs. Smith can give each of her 2 children $17,000 this year and her husband can also give them each $17,000, for a total of $34,000 to each child.  They also could give a total of $34,000 to each of their 5 grandchildren.   This transfer of $238,000 to their descendants in 2023 is allowed without touching their combined $25.84 million gift tax exemption.

2023 Irrevocable Trust Income Tax Brackets

Trust Income Tax brackets increased slightly (as did individual/joint( to the following:

10% $0 to $2,9000

24% $2,901 to $10,550

35% $10,551-$14,450

37% $14,451 and higher

Colorado Small Estate Affidavit

The Colorado Small Estate Affidavit value increased by several thousand dollars to $80,000.   This is the value over which a probate is required for individually held assets at someone’s death.