January 2015< Back to View All Publications
Happy New Year! A new year means new tax levels for federal estate and gift taxes. Here is an overview of the 2015 rates.
The federal estate tax has once again been indexed for inflation and increased to $5,430,000 for decedent’s who pass away in 2015. This is an increase from the 2014 rate of $5,340,000 – or an additional $90,000. Note that for a married couple, each spouse has an exemption amount of $5,430,000 or $10,860,000 for the couple.
In regards to gift taxes, there are two factors to consider: a lifetime exemption amount and an annual exclusion amount.
The lifetime gift tax exemption amount is the maximum amount a person can give away during their entire lifetime without paying gift tax. The lifetime gift tax exemption is the same amount as the federal estate tax exemption – $5,430,000 for 2015 – and is called the unified credit. Any amounts gifted by a person during life must be reported to the IRS and will then reduce the amount that can be exempted from estate taxes after death. In other words, you can’t give away $5,430,000 during life and then again upon death.
The annual gift tax exclusion amount is the maximum amount a person can give to another person in any given year without incurring federal gift tax. This amount is periodically indexed in increments of $1,000 for inflation. In 2015, the amount remains unchanged at $14,000. This means you can give up to $14,000 to an unlimited number of other individuals free of gift tax (same exemption amount as last year) in 2015. For example, I could give $14,000 to each and every person reading this email and avoid gift tax!
Married couples can combine this and give gifts up to $28,000 to an unlimited number of people free of tax. If a married couple wanted to give the maximum annual gift to all of their three grandchildren, they could give $28,000 to each of the grandkids for a total gift amount of $84,000 free of any gift tax. Any gifts above these amounts are subject to gift tax and need to be reported. Making annual exclusion gifts can be a great way to shift wealth free of tax.
Keep in mind that some gifts can be made free of tax no matter the amount that is given. Gifts from one spouse to the other spouse are generally tax free unless the receiving spouse is not a U.S. citizen. Gift taxes are not applied on gifts to charities.
It is important to be mindful of the gift tax rates. These tax rules can have an impact on your remaining estate tax exemption upon death and also your eligibility for public programs, like Medicaid, during life. Please contact me – or talk to your CPA – should you have any questions about the estate and gift tax rates for 2015.
My best wishes for a happy, healthy and successful 2015!
Cordially, Kristin Tyler