Tax Tip
Changes in Gift Tax
If you are fortunate enough financially to be able to
make significant gifts to family members and others, you may want to pay
attention to the changes in gift tax law being proposed by the President.
For a number of years, the amount of tax-free gifts one
could make was limited to an annual per-recipient amount of $14,000 in 2014 and
an additional lifetime amount of $1 million dollars.
Those rules were liberalized beginning in 2010, when the
gift and estate tax limits were unified so that the estate tax exclusion could
be used for a combination of taxable gifts and estate tax exclusions. This
currently permits gifts up to the estate tax exemption limit of $5.34 million
for 2014 without incurring any gift tax. But gifts in excess of the annual
$14,000 limit are not without future estate tax implications because a gift
that exceeds the annual per-recipient exclusion reduces the estate tax
exemption by the excess amount of that gift. Thus, current gifts could cause
the taxable estate of the gift giver to be higher and taxed at rates
substantially higher than normal income tax rates when he or she passes away.
The President’s estate and gift tax proposal would,
beginning in 2018, return the estate, generation-skipping transfer (GST), and
gift tax exemption and rates to 2009 levels. Thus, the top tax rate would be
45%, up from the current 40%, and the exclusion amount would be $3.5 million
for estate and GST taxes, nearly $2 million less than the current exclusion
amount. In addition, the lifetime exclusion for gifts would return to $1
million. The proposal makes no changes to the amount of the annual gifting
limit.
Although 2018 is over three years away and there are no
assurances that the President’s proposal will actually become law, its
potential impact on gift giving should be considered in one’s long-term gift
planning.
If you need assistance with long-term gift and estate
tax planning, please give this office a call.
Ten Forty plus Quality Tax Preparation & Financial Services
www.tenfortyplus.com
281-397-7777, Fax 281-397-7443
joeb@tenfortyplus.com
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