Gift Tax

Integrated with estate tax

gift tax

Here in the US, Gift Tax is integrated with estate tax.

We saw how estate tax is levied on the value of property one controls at death. Absent Gift Tax, one would simply give away - or gift - one's otherwise taxable property. Voila! Nothing left to be taxed! So, Gift Tax applies to transfers during one's life.

How Does Gift Tax Work?

You keep track of what you give away during your lifetime.

Property like shares is valued at fair market value when you gifted it, so you might need a Family Business Valuation.

Certain gifts are excluded altogether - never taxed!

  • gifts to one's spouse
  • gifts to recognized charities
  • gifts below the annual exclusion amount, which is presently $11,000 per year per person. - regardless of how many such gifts are made. Also, there are circumstances when gifts to an individual can exceed the usual $11,000 annual limit and still not be taxable - gifts that are made directly for tuition or medical expenses.

What isn't excluded is a Taxable Gift

Up to $1 million of taxable gifts will not result in a Gift Tax actually payable. At death, the amount of taxable gifts up to $1 million cumulative is deducted from the Estate Tax unified exemption that would otherwise be allowed. To the extent that the exemption is thus reduced, more estate tax is payable.

If, during one's lifetime, taxable gifts exceed $1 million, Gift Tax is payable. The rates are comparable to estate tax rates.

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