Revenue Procedure 2023-34 was released by the IRS on November 9, 2023. It provides full details about the annual inflation adjustments that are important in the world of US tax and impact over 60 tax provisions in the Internal Revenue Code (“Code”), including tax rate schedules and many other tax changes.
Tax pro’s have been waiting impatiently for this release, which came quite late this year. I’ve summarized below the significant changes that involve international/foreign tax matters such as the foreign earned income exclusion, reporting of foreign gifts and many more that impact the foreign individual or American abroad. I have kept the index numbers the same as in the Revenue Procedure and provide links to some of my blog posts involved in the particular topic. All references are to Code sections.
Happy reading!
.37 Expatriation to Avoid Tax 877
For calendar year 2024, under § 877A(g)(1)(A), unless an exception under § 877A(g)(1)(B) applies, an individual is a covered expatriate if the individual’s “average annual net income tax” under § 877(a)(2)(A) for the five taxable years ending before the expatriation date is more than $201,000. If you want to learn more about expatriation see my tax blog category here – full of the latest information and planning ideas.
.38 Tax Responsibilities of Expatriation 877A
For taxable years beginning in 2024, the amount that would be includible in the gross income of a covered expatriate by reason of § 877A(a)(1) is reduced (but not below zero) by $866,000 pursuant to § 877A(a)(3). Essentially this is an exclusion amount that can reduce or eliminate any “ exit tax” that is owed under the mark-to-market regime imposed on “covered expatriates”. Remember though, the exclusion will not offset certain items – such as deemed income from foreign pensions. The expatriation rules also provide for the possibility to defer payment of the exit tax. You can read all about who is a “covered expatriate” and about the possibility to defer exit tax at my blog post here.
.39 Foreign Earned Income Exclusion 911
For taxable years beginning in 2024, the foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $126,500. Everything you need to know on this topic can be found in my blog post category covering the foreign earned income and housing exclusions, how to qualify and what to do to keep these benefits intact. If you are a green card holder, you need to be extra careful since claiming the exclusions could possibly jeopardize your green card for immigration law purposes. My blog post covers this issue.
.41 Unified Credit Against Estate Tax
For an estate of any decedent dying in calendar year 2024, the basic exclusion amount is a very generous $13,610,000 for determining the amount of the unified credit against estate tax under § 2010.
Gift and Estate taxes are inextricably linked. The basic exclusion amount is the same for both taxes, but with respect to foreign individuals there are many nuances and special rules. Check out my blog post category covering US Gift and Estate taxes. Read more about the US Estate and Gift taxes that may be assessed on non-US persons in my earlier blog posts here and here.
The US gift and estate tax exemption is quite high at the moment; it is linked to a $10 million per individual exclusion amount that is indexed for inflation. This historically high exemption will continue to increase based on inflation. On January 1, 2026, however, this generous exemption is scheduled to sunset and will revert to the previous $5 million per individual exclusion amount. The recent high inflation provides a huge opportunity for tax-efficient gifting in 2024 and 2025. People must act quickly though – gifting programs can sometimes take time to implement. For example, timing can be impacted based on the assets involved and whether the gifts will be made in trust. If non-US persons will be given gifts, extra planning considerations come into play. Get the right tax advice to avoid complications and errors.
.43 Annual Exclusion for Gifts 2503; 2523
(1) For calendar year 2024, the first $18,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts under § 2503 made during that year.
(2) For calendar year 2024, the first $185,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts under §§ 2503 and 2523(i)(2) made during that year.
Marriage to a foreign individual will complicate your tax life in so many unexpected ways, especially when gifts are made or property is owned jointly. My blog post here gives you a taste.
.47 Notice of Large Gifts Received from Foreign Persons 6039F
Notice of Large Gifts Received from Foreign Persons. For taxable years beginning in 2024, § 6039F authorizes the Secretary of the Treasury or her delegate to require recipients of gifts from certain foreign persons to report these gifts if the aggregate value of gifts received in the taxable year exceeds $19,570.
Gifts from foreign individuals must be reported if the aggregate annual gifts exceed US$100,000/. Note, the duty to report foreign gifts does not mean such gifts are taxed. “Gifts” from foreign corporations or partnerships received in the year must be reported at the lower threshold level $19,570. These are so-called “purported gifts” and are taxed quite punitively to the US recipient.
Want to learn more about gifts and bequests from foreign persons, check my blog post here – spoiler alert, it’s complicated.
Posted November 23, 2023
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