You can give up to $13,000 to any number of people without having to pay gift tax. This is the federal gift tax rate for the years 2009, and 2010. You may not know this, but it’s actually the giver who pays the gift tax. The people who receive the gifts never have to pay taxes on the gifts.
$1,000,000 Please
You are allowed by the federal government to give up to $1,000,000 during your lifetime without having to pay the gift tax. The government is really putting these laws into place so people can’t find a way to give away a lot of money to avoid the federal estate tax which is the tax people are hit with when receiving money as an inheritance. You are going to be taxed one way or another.
You can either space it out the gifts in amounts less than $13,000 before you die, or leave money as an inheritance and pay the estate tax. Of course there are always ways to get around some forms of taxation. You can give money directly to a college to pay the tuition of a friend, or relative which will be tax free. You can always donate to charity which is tax free and you can pay medical bills for people, which is also tax free.
The Gift Tax and the Estate Tax
The gift tax is a monetary gift given before you die and the Estate Tax is placed on monetary gifts bequeathed to loved ones after you die. Your estate is the total value of everything you own when you die after you have subtracted your debts. If happen to have an estate worth more than 3.5 million in the year 2009, any amount beyond that 3.5 million will be subject to estate tax which can go as high as 45%.
In the year 2010 the exclusion amount will drop to 1 million dollars. There are a lot of estate planning management plans that will save you money if carried out in the right way. Get the gift giving facts straight and protect yourself and loved ones from giving a large chunk of it away to good ol’ Uncle Sam.
Inheritance Verses Gift
There’s a huge tax difference between an inheritance and a gift. You should look into the rules about property given as an inheritance compared to property given as a gift. The laws are very different in these two categories. If you do have a substantial estate, you will want further information concerning property.
Reducing the Value of the Estate by Giving
You can reduce the tax of your estate by reducing the value of your estate before you die by giving tax free gifts. There are many ways to give charitably without paying tax on the gift. I know I don’t want my estate to be taxed at a federal tax rate up to 45%, and I don’t think anybody really wants to think that about that.
If you have the ability to spread your money around to your children or loved ones tax free, then you will probably want to do that. If you would like more help or information concerning the gift tax rate, you should visit TurboTax Online. Their web site has a lot of helpful information and will help you to calculate your tax rates. TurboTaxOnline has a free tax calculator that you can use to estimate your taxes which is very helpful. Go to TurboTax Online and give it a try today!
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