Gift tax laws - know them to use them

Added: 02/17/2006

It is widely-known that Americans are the most truthful tax payers. They know gift tax laws better than the people of other countries. But still we would like to talk to gift tax payers about gift laws as sometimes you may have no idea you are making a present and you, as well as the receiver, need to fill a gift tax form.

Gifts are made not only to treat the beloved and spoil them with something gorgeous, but also to reduce the net worth, when you "present" some of your assets to members of your family. One uses gifts when he or she wants to help children to reduce the estate tax after the death of parents. But we want to tell you that gift tax laws were created to thwart you from doing that. Moreover, a new estate tax may help you reduce the sum of taxation, so may be sometimes there is no need to try and cheat on the state.

But on the other hand, it is a very good idea to get acquitted with gift tax laws, because it may happen that you do not mean to make a gift, but according to the law you are actually giving a gift.

You may be potential gift tax payers if you give something to someone and do not get back the full price of it. We draw your attention to the word "full." You may sell to your son your new Porsche for one dollar - so you get money for the car- but still it is a gift as you do not receive the full price of the car.

You need to fill out a gift tax form if you made any gift during the year. But if you made gifts with a total price of which is higher than $11,000, then you will have to pay taxes. If the total price is $11,000 or less, than it is not taxable. Besides, if during your lifetime, you have gifted more than $1,000,000, then every dollar, exceeding the million, will be taxed, and this time the tax rate will be about 47% and more. That is why there is no reason to gift your estate to avoid estate taxes. Gift taxes will be as high. But in the less than the taxable million, every dollar that exceeded an $11,000-limit each year is included.

We want to remind you that helping your adult children is considered to be a gift, but payment to their education is not. It means that you can pay $10,000 for your son's education and give him $11,000 more for living expenses. And neither you, nor he will have to pay gift taxes. But if you give your son $21,000 so that he paid for the education, $10,000 will be taxed, according to gift tax laws.

Helping someone else is always appreciated, but will not always stay free of taxes. But payment for medical service, including transportation for medical purposes, is not taxable.

If you make a taxable gift, you need to fill the gift tax form number 709. Sometimes you can also get a gift tax return. It is written there that in 2009 you will be able to have assets up to $3,500,000 in price and pay no estate tax. In 2010, there will be no estate tax at all, no matter how big the assets are, but in 2011, everything will be as well as today, unless Congress makes a new decision. So maybe you do not have to hurry with your estate and make gifts to your children. There are lots of details in the gift tax laws that can help you to reduce your tax gift. You can give your children $44,000 a year, but register it for the four following years. You will not have to pay tax, but according to the gift tax laws you will not be able to make not taxable gifts the following four years as well. The American laws are the most understandable for people, so get acquainted with them and make gifts with the greatest pleasure.

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