Washington State Gift Tax
Washington State Gift Tax - When you make a purchase through links on our site, we may receive an affiliate commission. Here's how it works. Do you want to give money or real estate to family or friends? You can save time and money by staying exempt from the annual gift tax.
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Washington State Gift Tax
A gift tax exclusion (also known as a gift tax limitation or gift tax exemption) allows you to give money or property to family members, friends, and others each year without having to pay federal gift taxes or file a gift return. The federal gift tax rate ranges from 18% to 40%, so you can save a lot of money by avoiding the tax.
And you don't have to worry about filing gift taxes, which saves you a lot of time. So if you're feeling generous, make sure you're aware of the gift tax exclusion limitation for 2023. Generally, the federal gift tax applies to all gifts of real estate that an individual makes during the year.
The tax is usually paid by the donor, not the recipient. However, if the donor does not pay the tax, the recipient may have to pay it. Additionally, if the donor dies before the tax is paid, the estate is responsible for paying the tax.
What's The Gift Tax Exclusion For 2023?
IRS Form 1099-K: When Can You Get It From Venmo, PayPal, or Cash? It does not matter whether the gift is made directly or indirectly. And gift tax doesn't just apply to cash gifts. It applies whether the property given is real estate, personal, tangible or intangible.
Source: www.cbo.gov
So, for example, exchanging a lot, gifting a car, forgiving debt, transferring insurance policy benefits, or transferring stock can trigger a federal gift tax bill. And if you give something other than money as a gift, for gift tax purposes, the amount of the gift is the "fair market value" of the property on the date of the gift.
Earn and succeed with the best expert advice on investments, taxes, retirement, personal finance and more - straight to your email. Earn and succeed with the best expert advice - straight to your email. Note: In general, a gift is considered "given" for gift tax purposes if you transfer the property to someone else and do not expect something of at least equal value in return.
Fortunately, there are many gift tax exemptions that you can use to avoid paying tax. The most well-known exemption is the annual gift tax exclusion. This is a set dollar amount you can put in each year that is tax-free (the amount is adjusted for inflation each year).
What's The Federal Gift Tax?
And you can donate this amount to any number of people during the year. If you're married, your spouse can give the same amount - even to the same people who receive gifts from you. Other gift tax exemptions may also apply. For example, gift tax generally does not apply to the following gifts: However, it is important to note that there may be special requirements or other exceptions to these exemptions and other exemptions that may apply in certain situations.
Therefore, it is best to consult a tax professional before making any major gift to determine whether an exemption applies. The tax-free gift limit (without gift tax) was $17,000 in 2023 (it was $16,000 in 2022). As a result, you can gift up to $17,000 to as many people as you want in 2023 without having to worry about paying federal gift taxes.
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And again, if you're married, your spouse can give $17,000 to the same people. Between you and your spouse, that's a total of $34,000 per person in 2023. Also, if you stay below the gift tax threshold for each recipient, you don't have to file a gift return for that year.
So, for example, if you're married with two married children and four grandchildren, you and your spouse can give up to $34,000 to each of your children, spouses, and grandchildren in 2023 without having to invest a gift. file a tax return or pay any tax.
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That's a tax-free gift worth $272,000! Note that the $17,000 (or $34,000) limit is an annual limit, so gifts must be made by December 31, 2023 (and gift checks must be deposited by that date). Tax Tip: If a married couple sells community property, the gift is treated as if the couple gave away half of the property, which can affect whether the $17,000 gift tax is exceeded.
For example, a gift of $20,000 of joint property is considered two separate gifts of $10,000 each made by the spouses. Spouses can also agree to "split" a gift that is not joint property, if certain conditions are met. If you give someone more than $17,000 in 2023 and it's not exempt, you must file a federal gift tax return (IRS Form 709 (opens in new tab)).
However, this does not necessarily mean that you have to pay tax. There's also a lifetime gift tax exclusion that can protect your gifts from tax — and it's a pretty high limit, so most people never have to pay gift tax. In 2023, the lifetime gift tax limit is $12.92 million (I told you high!).
Source: files.taxfoundation.org
This compares to $12.06 million in 2022 (adjusted annually for inflation). Additionally, if you are married, the lifetime limit is double the annual limit. (The lifetime gift tax exemption is the same as the annual estate tax exemption.) So, any year you exceed the annual gift tax exemption for any recipient, the excess must be reported on Form 709 for that year.
What Is The Tax-Free Gift Limit For 2023?
However, you don't have to pay gift tax unless the total amount reported on all Forms 709s during your lifetime does not exceed the gift tax limit for that year. As a result, only wealthier Americans who sell large sums of money or real estate are hit with gift tax bills.
Most people don't need to worry about this. Under the plans, the gift tax exemption will be halved by 2026. The 2026 lifetime cap is estimated at about $6.8 million. Congress may finally pass the current amount, but there is currently no reason to believe that will happen.
Fortunately, IRS regulations allow for a lifetime gift tax exclusion at the time of the gift or the amount of the exclusion in effect at the donor's death, whichever is greater. As a result, people who make large gifts before 2026 do not have to worry about losing the benefit of the higher gift tax exclusion amount after it is reduced.
Rocky Mengle served as Kiplinger's senior tax editor from October 2018 to January 2023 with more than 20 years of experience in federal and state tax development. Prior to Kiplinger, Rocky worked at Wolters Kluwer Tax & Accounting and Kleinrock Publishing, providing breaking news and advice to CPAs, tax attorneys and other tax professionals.
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