Give a gift (or 2)
Managing gift exemptions can seem tricky when the amount is constantly changing. The annual gift tax exclusion amount increased from $17,000 in 2023 to $18,000 in 2024, meaning you can give any number of people $18,000 tax-free. But if your gift exceeds this amount (for example, you give your oldest daughter $20,000), the excess ($2,000) could be taxed. However, you and your spouse can gift anyone a total of $36,000 ($18,000 from each of you) and neither you nor the recipient will be taxed.
The lifetime estate and gift tax exemption also increased to $13.61 million this year (from $12.92 million in 2023). This exemption allows you to give a much larger gift to someone without paying the gift tax. Let's say you gift someone $100,000 in 2024; $18,000 will count toward the annual gift exclusion. The remaining $82,000 will trigger the gift tax, but you can file a gift tax return (IRS Form 709) and allocate that amount toward your lifetime estate and gift tax exemption balance so that you won't have to pay taxes.