Federal Gift Tax

The federal gift tax is imposed on transfers during life that exceed certain annual exclusions. The rates of tax are exactly the same as those of the federal estate tax. Unlike the estate tax, which is repealed after 2010 under current law, a gift tax will continue to be imposed but the gift tax rates will range from 18 percent to 35%.

The gift tax law provides an annual exclusion of $10,000.00 per donee. If a married couple desires, they may give $20,000.00 per donee. In addition to the annual exclusion, every individual may also use the same $675,000 exclusion which is available for the estate tax in order to save on gift taxes. You may make gifts in excess of your annual exclusion, but doing so will begin to "eat into" your $675,000 exclusion. As the exclusion amount is exhausted by lifetime gifts, it will not be available to be used as a credit against the estate tax which may be payable upon death.

By gifting property during life, the post-gift appreciation in the value if the property may escape federal estate tax upon death. For example, a gift of $10,000.00 in stock may grow to $100,000.00 at the time of your death. The gift would be measured by the $10,000.00 value at the date of the gift. The $90,000.00 of appreciation would escape both gift and estate taxation upon your death.