The Death Tax Series (Part 1 of 3)
We all worry about income tax, but there are other taxes that you need to consider when you’re dealing with an estate or a property that is switching hands either at death or during life. In part 1, we will discuss the gift tax. in part 2, we will discuss the federal estate tax. In part 3, we will put it all together and conclude.
Part 1: Gift Tax
The gift tax is a tax on the transfer of property from one person to another while receiving nothing, or less than the full value, in return. The person making the gift, also known as the donor, is generally responsible for paying the gift tax. The IRS says that you do not have to pay any gift tax if your gifts are not more than the annual exclusion for the calendar year. For example, in 2017 the annual exclusion is $14,000, I can give $14,000 to as many people as I want without having to pay any tax. If you gift over $14,000 in 2017 to the same individual, you must report this to the IRS.
Most individuals still will not owe taxes, instead they will use some of their lifetime gift tax exemption. In 2017, this is up to $5.45 million. The IRS does track how much of your exemption you use, and any remaining amount will be applied at your death to determine if you will owe any estate taxes. As a result, you should consult a CPA if you plan to make gifts over the annual exclusion amount in any given calendar year.
Stay tuned for next week when we discuss the federal estate tax. If you want to learn more and don’t want to wait, call the Law Office of Lisa C. Bryant today for your Free Consultation.