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The Gift Tax

It’s bad enough that the us government has the audacity to tax your family at fifty five percent on the assets that you choose toleave them when you die (property that you have previously paid tax on during your lifetime). One would think that taking eighty percent of everything you’ve ever obtained would be sufficient, but you’d be wrong. There’s yet another tax, the gift tax, which will tax you at the rate of forty five percent on any transfer of assets you make during your lifetime.

This “gift tax” excludes transfers between married couples, since a husband and wife can transfer as much as they want to each other. It is no act of generousity on the part of the Federal government to permit you to transfer your assets to a person with whom you already share ownership of the assets.

The government does allow further exceptions. Every year, you may transfer up to $13,000 worth of cash or assets to any other personl tax-free. You can even walk down the street and hand out $13k to every person you see and you this will be aceptable and tax free, however, every penny beyond the $13,000 will be taxed at forty-five percent, so, if you want to buy your son, or daughter a car or truck, valued at $20,000, you have to fill out a gift tax form and fork over to the Federal government $3,150 in taxes for that year.

If you decide to purchase a house for your daughter as a wedding present, and the house sells for $150,000, you’ll owe a gift tax of $61,650. Even if you mortgage the purchase and pay monthly, you will owe the entire $61,650 for that year’s tax return the government will not wait. .

One way to circumvent this would be to buy the house as an investment property for yourself and rent it to your daughter for around $1k/month ($12K year). Then gift her the rent. Since the annual rent is les than $13K, it’s gift tax free.

There are 3 major exceptions to the gift tax rule. You are permitted to give any amount to your spouse with no additional taxable liability. This will enable us to transfer assets for estate planning purposes.

You may also give as much money as you wish to any IRS-recognized charity which has filed a Form 501(c)(3) and been approved.

A third exception to the gift tax is the ability for you to donate money or assets for either educational, or medical expensies. Many seniors have been able to reduce their estate tax by providing their grandchildren with college educations through 529 plans or Prepaid College Programs.

The gift tax is a horrible tax in that it levies a penalty on generosity, however there are many techniques available to us to limit the amount of gift tax you will be asked to pay during your lifetime. To learn more, consult your Estate Planning Attorney. In Fort Lauderdale, or, indeed anywhere in Florida, contact Wild Felice and Partners, P.A. at 954.944.2855 and request a free consultation.