A number of transfer and foreign tax figures are adjusted annually for cost-of-living increases. These adjustments reflect, under a new measure of inflation provided by the Tax Cuts and Jobs Act (TCJA; P.L. 115-97, 12/22/2017), the average chained Consumer Price Index (CPI) for all-urban customers (C-CPI-U) for the 12-month period ending the previous August 31. The August 2021 CPI summary has been released by the U.S. Bureau of Labor Statistics.
Using the chained CPI for August 2021, and the preceding 11 months, the calculated 2022 indexed amounts for transfer tax and foreign items are:
- Unified estate and gift tax exclusion amount. For gifts made and estates of decedents dying in 2022, the exclusion amount will be $12,060,000 ($11,700,000 for gifts made and estates of decedents dying in 2021).
- Generation-skipping transfer (GST) tax exemption. The exemption from GST tax will be $12,060,000 for transfers in 2022 ($11,700,000 for transfers in 2021).
- Gift tax annual exclusion. For gifts made in 2022, the gift tax annual exclusion will be $16,000 ($15,000 in 2021).
- Special use valuation reduction limit. For estates of decedents dying in 2022, the limit on the decrease in value that can result from the use of special valuation will be $1,230,000 ($1,190,000 for 2021).
- Determining 2% portion for interest on deferred estate tax. In determining the part of the estate tax that is deferred on a farm or closely-held business that is subject to interest at a rate of 2% a year, for decedents dying in 2022, the tentative tax will be computed on $1,640,000 ($1,590,000 for 2021) plus the applicable exclusion amount.
- Annual exclusion for gifts to noncitizen spouses. For gifts made in 2022, the annual exclusion for gifts to noncitizen spouses will be $164,000 ($159,000 for 2021).
- Reporting foreign gifts. If the value of the aggregate "foreign gifts" received by a U.S. person (other than an exempt Code Sec. 501(c) organization) exceeds a threshold amount, the U.S. person must report each "foreign gift" to IRS. (Code Sec. 6039F(a)) Different reporting thresholds apply for gifts received from (a) nonresident alien individuals or foreign estates, and (b) foreign partnerships or foreign corporations. For gifts from a nonresident alien individual or foreign estate, reporting is required only if the aggregate amount of gifts from that person exceeds $100,000 during the tax year. For gifts from foreign corporations and foreign partnerships, the reporting threshold amount will be $17,339 in 2022 ($16,815 for 2021).
- Expatriation. For 2022, an individual with "average annual net income tax" of more than $178,000 ($172,000 for 2021) for the five tax years ending before the date of the loss of U.S. citizenship will be a covered expatriate. (Code Sec. 877(a)(2)(A)) Under a mark-to-market deemed sale rule, all property of a covered expatriate is treated as sold on the day before the expatriation date for its fair market value. However, for 2022, the amount that would otherwise be includible in the gross income of any individual under these mark-to-market rules will be reduced by $767,000 ($744,000 for 2021). (Code Sec. 877A(a)(3))
- Foreign earned income and housing cost exclusion. The foreign earned income exclusion amount will be $112,000 in 2022 ($108,700 in 2021). The foreign housing cost exclusion will be $15,680 in 2022 (up from $15,218 in 2021).