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What are gift taxes?
The Economic Growth and Tax Relief Reconciliation Act of 2001 did not abolish the gift tax as are the estate and generation-skipping transfer taxes. The law retained the $10,000 per year per donee exemption, although the amount is indexed annually ($13,000 starting January 2009). The lifetime exemption from gift tax is fixed at $1,000,000 which means that gifts above that amount are subject to tax under the same rate schedules as the estate tax until 2010 (in 2011, the rate reverts back to a top rate of 55%).
Gift Taxes basically are taxes that supplement the Estate Tax. Gift Taxes are placed on gifts given away to any person while you are still living. You may give up to $13,000 starting January 2009 in cash or assets to an unlimited number of people each year without incurring Gift Tax liability -- so long as there are no strings attached. Married couples can give, as a couple, a $26,000 per year to as many people as they want. If you give more than the limit annually, the excess is applied toward your lifetime gift-tax exclusion. If at any point the gifts you gave during your life or left in your estate exceed that exclusion, you pay gift tax on the excess amounts over $1,000,000. Of course, any gift transferred between spouses (where both are US citizens) of any size is 100% Gift Tax-Free.
In actuality, the payment of Gift Taxes is relatively rare, thanks to the annual exclusion, and the unlimited marital and charitable deduction. |
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