The Truth About Gift Tax
September 1, 2017
One of the most common areas of confusion with respect to estate planning is gift tax. Gifts are made for a myriad of purposes, including celebrating occasions, helping a child or other family member, protecting assets from potential nursing home costs or even reducing an estate for estate tax purposes. Gifts are often made without the realization that certain gifts must be reported to the government via a gift tax return. When taxable gifts have been made, the gift tax return must be filed by April 15th of the following year – i.e. along with your income tax returns.
Massachusetts does not impose a gift tax regardless of the amount that has been given away. For Massachusetts residents, tax is imposed only by the federal government. That being said, most people believe that they can gift $10,000 per year without reporting it. In fact, the annual exclusion amount is based upon the Consumer Price Index, and the exclusion has increased gradually from $10,000 in 1997 to $13,000 in 2009. Recently, the Internal Revenue Service announced that the 2010 gift tax annual exclusion will remain at $13,000. This means that an individual can give up to $13,000 to as many people as desired in 2010, and there is no requirement to file a gift tax return reporting the gifts. A married couple can gift $26,000 to as many individuals as desired, as each spouse receives their own exclusion. If no gift tax return is required, then obviously no gift tax will have to be paid.
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by: Gina M. Barry