July 29, 2013 - Posted by: admin - In category:

taxes - No Responses

Gifting of assets is a good thing, but it must be done with an understanding of applicable tax ramifications, specifically with regard to federal gift tax.

All U.S. citizen taxpayers are given something called the Unified Credit Exclusion Amount, which can be used toward any applicable gift taxes incurred throughout their lifetime (and/or against estate tax and/or GST). The Unified Credit Exclusion Amount in 2013 is $5,250,000 (which is indexed for inflation). This means that a taxpayer can gift $5,250,000 worth of assets that otherwise would not qualify for a gift tax deduction or that are not otherwise exempt from gift tax without owing any gift tax. Here’s an example:

Assume that Steve gifts $200,000 to his daughter Mary. Steve has made a $200,000 taxable gift. However, Steve’s Unified Credit Exclusion Amount covers this gift. Therefore, Steve will not owe federal gift taxes as a result of this transaction. However, the use of $200,000 of his Unified Credit Exclusion Amount will serve to reduce the amount available to him later in his life (or at his death), including with respect to any future gift tax, estate tax and/or generation skipping tax (“GST”) due at a later date.

In addition, everyone is given an Annual Exclusion Amount equal to $14,000 for 2013 (indexed for inflation) per gift recipient that can be transferred free of gift tax and without using a portion of the available Unified Credit Exclusion Amount. Further, this $14,000 per year, per recipient can be doubled by a married couple ($28,000 per year), so long as the correct tax forms are filed during the year of such gifts.

There are several more important aspects to this discussion of gift taxes, including:

unlimited marital deduction for transfers between U.S. citizen spouses
transfers to qualified charitable organizations
transfers for tuition
transfers for medical expenses

Please contact us to learn more about these important issues.

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