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Estate Planning Update Winter 2021/2022 - 2022 Inflation Adjustments

Publisher: Day Pitney Estate Planning Update
December 9, 2021

Each year, certain federal gift, estate and generation-skipping transfer (GST) tax figures are subject to inflation adjustments:

  • For 2022, the annual exclusion amount for gifts increases to $16,000 (from $15,000). The annual exclusion amount for gifts made to a noncitizen spouse in 2022 increases to $164,000 (from $159,000).
  • The federal gift, estate and GST tax exemption amount for gifts made in 2022 and decedents dying in 2022 increases to $12,060,000 (from $11,700,000 in 2021). These exemption amounts apply to U.S. citizens and those domiciled in the United States.

There are changes to exemptions in three of our footprint states as well:

  • The Connecticut gift and estate tax exemption for gifts made in 2022 and decedents dying in 2022 increases, to $9,100,000 (from $7,100,000).
  • The New York state estate tax exemption increases with inflation each year. As this newsletter goes to press, the 2022 exemption has not been announced—it was $5,930,000 in 2021.
  • The Rhode Island estate tax credit amount increases to $70,490 in 2022, which effectively increases the estate tax threshold to $1,654,688 (from $69,515 and $1,595,156, respectively).

Also note some changes to retirement plan contribution limits:

  • The contribution limit for 401(k) plans will increase in 2022 to $20,500 (from $19,500). The limit for catch-up contributions to such plans for people over age 50 remains unchanged at $6,500.
  • The limit on annual contributions to IRAs remains unchanged at $6,000, with the IRA catch-up contribution limit remaining at $1,000.
  • For further information on retirement plan contribution limits, see our alert, "IRS Publishes 2022 Pension Plan Limitations."

An individual who relinquishes U.S. citizenship or longĀ­term residence status may be subject to a mark-to-market tax on the deemed sale of all assets and other adverse tax consequences if the individual's net worth is more than $2 million or the individual's average annual income tax liability is above certain thresholds. A certain amount of gain is excluded from the mark-to-market tax. Note these changes:

  • The income tax threshold for triggering covered expatriate status increases to $178,000 in 2022 (from $172,000).
  • The excluded gain under the mark-to-market tax increases to $767,000 (from $744,000).
Download the complete Winter 2021/2022 Estate Planning Update Newsletter
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