Understanding gift tax NYC 2025 rules is essential for New York families who want to maximize tax savings before the major federal exemption reduction in 2026. The bottom line is simple. If you’ve been thinking about transferring wealth to children, grandchildren, or other loved ones, 2025 is the year to do it with intention.
This guide breaks down how the annual exclusion works, what the current federal rules allow, and the strategies New Yorkers are using right now to reduce future estate taxes. Whether you’re planning major gifts, exploring trusts, or simply trying to avoid common mistakes, you’ll walk away with a clear, practical roadmap for giving wisely in 2025.
What Is the Gift Tax Annual Exclusion in 2025 for NYC Families?
The IRS allows every individual to give up to $18,000 per recipient in 2025 without triggering a gift tax return. Married couples can combine their exclusions and give $36,000 per recipient, and there’s no limit to the number of people who can receive gifts. Parents often use this exclusion for children, but grandparents, siblings, and close friends can all be recipients as well.
The second part of the rules is even more important. The federal lifetime gift and estate tax exemption is $13.61 million per person in 2025. This exemption covers both lifetime gifts and the value of your taxable estate at death. Large gifts made this year use part of that lifetime amount.
What makes 2025 unique is that this exemption is expected to drop to roughly $6.8 million per person beginning in 2026. Families using a portion of their exemption now can permanently lock in the higher 2025 level. This shift is why many NYC families are reviewing estate plans, revisiting beneficiary designations, and confirming they aren’t exposed to unnecessary taxes. In some cases, these updates go hand in hand with ensuring non-probate assets are transferred correctly, something we discuss in our blog on the pitfalls of beneficiary designations at https://thevillagelawfirm.com/five-pitfalls-of-beneficiary-designations.
While New York does not impose a separate gift tax, it does have a three-year rule. If you make large gifts and pass away within three years, the value of those gifts may be added back into your New York taxable estate. This can affect late-life transfers, so timing matters.
How Should NYC Families Use 2025 to Transfer Assets Strategically?
There are several approaches high-income and high-net-worth families are using this year. These strategies help preserve wealth, protect assets from New York estate tax, and support long-term family planning goals.
1. Make Use of the Higher Lifetime Exemption Before It Shrinks
Gifting in 2025 allows you to lock in today’s larger exemption even after it drops next year. This is particularly helpful when transferring assets that are expected to grow. Common examples include:
- NYC real estate including brownstones, condos, or rental properties
- Family business interests or partnership shares
- LLC or FLP units holding real estate or investment assets
- Investment portfolios
- Art or collectibles likely to appreciate in value
Example: A couple with a Brooklyn brownstone they expect to increase in value may transfer ownership to a trust this year. This move reduces their future estate tax exposure and shifts appreciation out of their estate.
2. Consider Creating a Spousal Lifetime Access Trust (SLAT)
A SLAT allows one spouse to gift assets to a trust that benefits the other spouse and their children. This approach removes assets from the taxable estate while still allowing the family indirect access to the funds. Couples appreciate SLATs because they:
- Preserve the 2025 exemption
- Provide long-term flexibility
- Offer creditor protection
- Support blended-family planning
SLATs are complex and require coordination with other documents like powers of attorney and guardianship provisions. Coordinating these pieces is similar to how we approach planning for families with international ties, which we explore in our blog on cross-border estate planning at https://thevillagelawfirm.com/estate-planning-when-family-ties-cross-borders.
3. Use Valuation Discounts to Increase Gifting Efficiency
If you transfer minority interests in an LLC, business, or investment entity, the IRS allows certain valuation discounts. These discounts reflect limited control and limited marketability, which can reduce the taxable value of the gift. A family might be able to transfer five million dollars of underlying value while using only a portion of their exemption on paper.
4. Superfund Irrevocable Trusts for Children
Families often “superfund” 529 plans or create irrevocable trusts for long-term benefit. Making multiple years of contributions in a single year gives the assets more time to grow outside your taxable estate. These trusts can also protect young beneficiaries from early access to large sums and support long-term financial structure.
5. Transfer Real Estate Into a Family LLC or Trust
Holding real estate through an LLC or trust can simplify long-term ownership, protect the property, and create an easier path for future transfers. These structures also provide guardianship and asset management benefits if something unexpected happens.
6. Complete Charitable Gifting Before Year-End
Charitable gifts completed in 2025 may provide income tax deductions and reduce your estate for future tax purposes. Donor-advised funds, charitable remainder trusts, and direct charitable gifts are popular options during high-income years.
7. Plan Early for Medicaid and Elder Care Goals
If long-term care is a concern, gifting strategies should be coordinated with Medicaid planning. Structures such as Medicaid Asset Protection Trusts can help shield the family home or savings, but early planning is essential due to the five-year lookback period.
What Gifting Mistakes Should NYC Families Avoid in 2025?
Even well-intended gifts can create tax or family issues when they aren’t properly planned. These are the most common concerns clients bring to our firm.
1. Overlooking Capital Gains Consequences
If you give highly appreciated real estate or stock, the recipient inherits your original cost basis. This may lead to significant capital gains tax if the asset is sold. In some cases, holding the asset until death provides a step-up in basis that eliminates most of the gain.
2. Ignoring the Three-Year New York Clawback
Large late-life gifts can be added back into your taxable estate if you pass away within three years. This rule can eliminate the intended tax advantage of the gift.
3. Adding Children to Real Estate Titles
Adding an adult child to a deed can trigger property tax issues, expose the home to the child’s creditors or divorce, and create complications for Medicaid planning. Title changes should be handled through trusts or LLCs, not informal ownership updates.
4. Forgetting to File a Gift Tax Return
Large gifts often require Form 709. Missing this step causes future IRS confusion and inaccurate lifetime exemption tracking.
5. Failing to Coordinate Giving With an Overall Estate Plan
Beneficiary designations, trust terms, and wills must work together. If the plan is inconsistent, some heirs may end up with more or less than intended.
6. Leaving Gifting Intentions Unclear
In blended families, undocumented gifts can lead to disputes. Your plan should clarify whether lifetime gifts count toward a beneficiary’s eventual inheritance or are considered separate.
7. Waiting Too Long to Plan for the 2026 Sunset
Many strategies take months to establish. Appraisals, trust creation, and LLC formation all require time. Starting early is the key to taking full advantage of 2025.
FAQs About Gift Tax Planning for NYC Families
How much can I give in 2025 without paying gift tax?
You can give up to $18,000 per person, or $36,000 as a married couple, without using any of your lifetime exemption.
Is there a New York State gift tax?
New York does not impose a separate gift tax, but gifts made within three years of death may be added back into your taxable estate.
Should I give real estate during life or leave it at death?
It depends on the balance between estate tax exposure and capital gains. Gifting removes future appreciation from your estate, but leaving property at death may provide a step-up in basis.
Ready to Use 2025 to Strengthen Your Family’s Financial Future?
If you want to make strategic gifts before the exemption decreases, we can help you understand your options and design a plan that aligns with your family’s goals. Contact The Village Law Firm to schedule a consultation.
