A Few Frequently-Asked Questions On Gift Tax
May 17, 2019
In November of 2018 the Internal Revenue Service announced that increased gift tax exclusions in effect through 2025 will end that same year. In 2025 the exclusion amount will return to its pre-2018 status; however, there are always key gift tax points to keep in mind. Here, your Encino tax consultants provide more information about gift taxes to help you avoid IRS complications.
Who Is Responsible For Paying Gift Tax?
The donor is typically responsible for paying all taxes on the gift, whether it be property, money, or other assets such as motor vehicles. There are exceptions where the receiver pays the tax; however, such arrangements require detailed consultations with tax advisors.
What Is Considered A Gift?
Both direct and indirect transfers to individuals with no request for repayment are considered gifts. Any gift or donation over $15,000 is subject to federal income tax, with some states also issuing gift or estate taxes. At this time Minnesota and Connecticut are the only states that collect gift tax.
Can I Deduct Gifts From My Income Tax Return?
Unless the gifts are to nonprofit organizations, they cannot be deducted from federal income tax returns. However, some gifts are exempt from tax regardless of their amount, such as property gifts to non-U.S. citizen spouses. Property given to tax-exempt charities, such as a religious, scientific, or literary trusts, are also exempt from gift tax.
What About Inheritance Tax On Gifts?
Inheritance tax is a type of state tax, so whether the receiver pays it on an estate gift from a relative solely depends on location. How much the estate is worth does not influence taxation. If the property is in Iowa, Maryland, Nebraska, Kentucky, New Jersey, or Pennsylvania, the receiver pays inheritance tax.
If you have any estate or gift tax questions, get the answers you need from your Encino tax advisors.
