Many people think they can only gift $10,000 per year per person. They are referring to the annual estate tax exclusion, which used to be $10,000. It's now $18,000.
The annual estate tax exclusion is what we call the freebie gift amount. In 2024, you can gift $18,000 per year to as many people as you want, literally anyone, it doesn’t even have to be family, with no impact on your gift and estate tax status.
But you can actually gift way more than that without incurring a gift tax.
The 2024 gift and estate tax exemption is $13,610,000. The exemption is a combination of lifetime gifts and estate value. Click here to see the historic gift and estate tax exemption amounts.
When you make gifts, you can use your $18,000 per person annual gift exclusion. But if you want to gift more, you can tap into your $13,610,000 gift and estate tax exemption.
Let’s say you want to gift $1,000,000 to your daughter in 2024. $18,000 would be covered by the annual gift exclusion, the freebie. The remaining $982,000 would be covered by your lifetime gift and estate tax exemption. If you died in 2024, your remaining estate tax exemption would be $12,628,000 ($13,610,000 - $982,000). As long as your estate value is less than $12,628,000, there would be no estate tax - even though you made a big gift to your daughter.
Your ability to gift without a tax is great. You have the annual estate tax exemption of $18,000 per person, plus you can tap into the $13,610,000 estate and gift tax exemption.
FYI. This discussion is about the federal gift and estate tax. Some states have a separate "state" estate tax. California does not have a "state" estate tax. California has very high income and sales taxes while you are alive, but it has no state estate tax when you die. At least we have that going for us!