What Gift Tax Limits are Non-taxable?
Not all gifts come for free and this is specially true when one speaks of federal gift taxes. When someone transfers a tangible or intangible property to another person, whether direct or indirect for no reason at all other than the purpose of giving – thus, the property being given is called a Gift. The recipient of the gift is also called the Donee, and the US federal government mandates taxes on gifts that exceed certain allowable amount per year. Gift taxes should not dissuade anyone from enjoying the spirit of gift-giving, specially when there are gift tax limits that are set. Normally, those true gifts you receive from an occasion like a wedding, birthday, graduation, or the holiday season don’t need gift taxes to be filed upon. But if you receive a gift that increases your earnings, you must report these if they exceed your yearly gift tax limits.
There is a good reason why the federal government imposes gift taxes on certain gift assets, with a set of gift tax limits each year. It is only logical that many people will use this as an excuse to give things away while they live so they can avoid estate taxes upon death. Gift tax is then created for the purpose of protecting losses from estate tax returns un-filed. Filing a gift tax form may be the last thing you have in mind, but if you don’t want future problems with the IRS ( Internal Revenue Services ), you need to do your filing accordingly. Always keep in mind the value of the gift at the time it was given which shall be crucial in determining if they are still within the gift tax limits or if you need to file a return when these gift tax limits are exceeded.
Five Gift Tax Limits You Need to Know:
According to the IRS, these are exceptions to gifts that are taxable, namely:
1. Gifts that don’t exceed the yearly gift tax limit amount set by the IRS
2. Gifts you give to your spouse
3. Gifts given for the use of a political group or charity
4. Gifts used for education
5. Gifts used for medical expenses
Take note that education expenses that are non-taxable can only apply to tuition fees paid directly to an individual or a certified local or foreign educational institution. For medical expenses, it can include medical insurance premiums paid directly to an individual or a medical institution. For gifts given on or after the 1st of January 2009, the annual gift tax limit rate is $ 13,000 for an individual. If you are married, you and your spouse can give gifts that are within the annual gift tax limit rate of $ 26,000. Exceeding these gift tax limits mean filing the IRS Form 709. This can happen if you had recently sold a home, a vehicle, or an heirloom and plan to give it away to your donee, who can be your family or close friends. Whether it’s cash or in kind, you need to hire an expert estate tax professional who can assist you in the complicated tax laws concerning gifts.
Lifetime gift tax limits have now increased to $ 3.5 million dollars for those who had died and passed on their estates as gifts on or after January 1, 2009. These gifts will be taxable if they exceed this limit. You need to file an IRS Form 706 to declare these lifetime gift taxes. If you need to know the rules on gift taxes for those who are non-residents of the United States, you may ask for more information on the Federal Transfer Certificate for international issues by calling: 1-202-874-1660. You may also write to:
Estate Tax Group S:SE:SP:EG:EC:1205
I.R.S. SB/SE Estate and Gift Tax Program
820 First St., N.E.: UCP-CNN-730
Washington, DC 20002-4243
For all your other concerns regarding gift taxes, gift tax limits, or estate taxes, you may contact the IRS toll-free hotline: 1-800-829-1040. If you need to talk to an IRS representative about the examination of your gifts, you can hire a professional who can represent you, given that you provide a Power of Attorney or a Form 2848, authorizing your representative to act on your behalf. Maximize Your Gift Tax Limits and Settle Your Dues!
RESOURCES:
IRS.Gov. “ Frequently Asked Questions on Gift Taxes. “ October 2008.
http://www.irs.gov/businesses/small/article/0,,id=108139,00.html
IRS.gov. “ What’s New: Estate and Gift Tax. “ October 2008.
http://www.irs.gov/businesses/small/article/0,,id=164878,00.html
Smart Money. “ When to File Gift Tax Forms. “ January 2009. The Wall Street Journal.
http://www.smartmoney.com/personal-finance/taxes/when-to-file-gift-tax-forms-9555/
Thomas, Kaye. “ Tax Rules for Gift. “ 1997 – 2009. Fairmark.com.
http://www.fairmark.com/begin/gifts.htm
Dana S. Beane & Company. “ Estate Tax Planning Techniques: Gift Definitions. “ 1999 – 2009.
http://www.dsbcpas.com/estatetaxplanning/gift.html
Clark, Ken. “ New 2009 IRS Gift Limit Announced. “ November 2008. About.com.
http://collegesavings.about.com/b/2008/11/29/new-2009-irs-gift-limit-announced.htm
