Overview on Gift Taxes

The laws regarding estate and gift tax issues are considered by many to be the most complicated in the Internal Revenue Code; therefore, we strongly recommend that you contact an Oakland County estate tax practitioner from our firm, since our founding attorney has considerable experience in this field.

You may be wondering what is considered as a gift in the eyes of the IRS, a gift is any transfer to an individual, either directly or indirectly where nothing is received in return. In general, any gift is considered a taxable gift; however, there are exceptions to this rule. The following are not considered taxable gifts and are not subject to taxes:

  • Gifts that do not exceed the annual exclusion for the calendar year
  • Tuition for educational expenses
  • Medical expenses
  • Gifts to one's spouse
  • Gifts to a political organization
  • Gifts to qualifying charities

Typically, the donor is the person responsible for paying the gift tax; however, under special circumstances the donee may agree to pay this tax instead. We encourage you to speak with our tax professional before considering this type of arrangement.

Making gifts or distributing your assets through your estate doesn't ordinarily affect your federal income tax, but you cannot deduct the gifts that you make unless they are gifts made to charitable organizations. If you are not sure whether your situation involves gift tax or estate tax, feel free to contact our office for further assistance.

The annual exclusion applies to each donee; for example, if you give each of your three children $14,000 (as of January 1, 2013) for their birthdays, the annual exclusion will apply to each gift.

If you and your spouse want to give a gift on property that you own together, then you are each entitled to an annual exclusion amount on the gift. As of January 1, 2013, together, you can give each donee $28,000.

Individuals who engage in the practice of making gifts as a part of their overall estate plan often engage the services of estate planning attorneys and other tax professionals. At The Law Offices of Stuart Lee Sherman, PC, our founding attorney not only has his J.D., but he also has an LL.M in taxation; he is admitted to practice law in the United States Tax Court, thereby allowing him to consult his clients on gift taxes, federal estate taxes and other tax planning matters.

Contact our office today to acquire more information about the interplay between estate planning and gift taxes. We can be reached at (248) 919-8029 for a free consultation.