Tax Free Gifts Have Increased in U.S.

Gift and estate tax laws allow Americans to make tax free gifts up to a certain amount. According to Bloomberg, Congress voted in December 2010 to increase that limit to $5 million for wealthy Americans, which led to a significant spike in the following years.

gift-free-taxIn 2012, U.S. taxpayers reported making $122 billion in nontaxable gifts, which is more than four times the amount seen in the past two years, Internal Revenue Service data showed. Much of this money came from the richest Americans, as $84 billion was in the form of gifts higher than $1 million, which were made by fewer than 30,000 people.

Lisa Featherngill, managing director at Abbot Downing – a wealth-management unit of Wells Fargo & Co. – told Bloomberg that wealthy Americans jumped at the chance to make tax-free gifts when Congress raised the limit.

“There was a huge scramble after 2010 to take advantage of the new law,” she said. “There was concern that the law was going to revert.”

Featherngill said she has six direct clients who have at least $50 million in investable assets, and all made large tax-free gifts in 2011 or 2012.

As of this year, the exemption amount is at $5.34 million, according to the Motley Fool, which means that very few people will actually have to worry about estate tax. However, even those that have an estate of more than $5.34 million can get around – or significantly reduce – their tax bill with some planning. For example, taxpayers can donate money to charities instead of paying it to the federal government.

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James F. McDonough, Jr. concentrates on wealth preservation and estate planning for high net worth individuals, closely held business matters and ownership succession, estate administration and income tax planning. He worked for three years for the public accounting firm, then known as Touche Ross, where he obtained his license as a Certified Public Accountant in 1983. In 1984, he was employed as a tax attorney by Union Camp Corporation where he engaged in planning for corporate income deferred compensation, qualified plan and tax-free exchanges. In 1986, Mr. McDonough was employed as Tax Manager for Monroe Systems For Business, Inc. Thereafter, he was employed as a tax attorney for five years where he engaged in corporate and estate tax planning and estate administration and litigation. For more information, please visit James McDonough's full biography at Scarinci Hollenbeck

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