While Florida does not have a gift tax, you do have to pay a gift tax to the federal government. The gift tax rules are complicated in that they have limits for yearly gifts and lifetime gifts. If you gift someone something that is worth more than $15,000 in one year, you’ll have to report that gift. However, in many cases you won’t pay gift taxes unless you exceed the lifetime gift and estate tax exemption. An estate planning attorney at France Law can help you plan for gifts over your lifetime so you can avoid taxation mistakes.
Know What the IRS Considers a Gift
Never assume something would not be considered a gift. When you make any money, asset, or property transfer to anyone else and do not receive, nor do you expect something that has an equal or greater value in return, the Internal Revenue Service (IRS) considers it a gift. The value of the an asset is the price someone would pay for it. You can find out the value of real estate by having it appraised. The value of personal property is what someone would reasonably pay if you were to sell it.
Know What the Exemptions Are
Every year, you can donate up to $15,000 to each person. This means that you can give your brother, your sister, your cousin, and your best friend up to $15,000 each every year before you have to worry about paying gift taxes. However, if you gift enough every year, you could reach the lifetime gift tax exemption. For 2020, that amount is $11.58 million. Once you reach that amount, you’ll have to pay the gift tax. If you make any gift over $15,000 to any person in any year, you have to file IRS Form 709. This is how the IRS keeps track of your lifetime gift giving amount. Florida tax attorneys at France law can help you manage gifting.
Know the Gift Tax Rate
Never assume that the gift tax rate is small. Depending on how much you exceed your lifetime exemption, the gift tax could be as high as 40 percent.
Don’t Forget to Count Your Estate
While Florida does not have an estate tax, the IRS counts your estate as gifts to your heirs. If your estate is worth over $11.58 million, it will have to pay taxes on anything over that amount. That could be up to 40 percent, which puts a huge dent in the amount you are leaving to your heirs.
However, estate probate attorneys at France Law can help you structure your estate and gift-giving during your lifetime. We will help mitigate the amount of tax you pay on large estates.
Donating Medical Costs
You may have heard that if you pay someone’s medical costs for them, that is a non-taxable gift, regardless of the amount. However, you cannot just give the person the money to use toward his or her medical bills. You must pay the medical facility directly. Also, only certain medical expenses are exempt from gift taxes so you will want to be clear on which expenses these include.
Donating Educational Expenses
You can also donate tax-free educational expenses. However, as with medical expenses, you cannot give the money to the student to use toward his or her educational expenses. Again, the IRS considers it as a regular gift. If that gift is over $15,000, you would have to claim it. You must pay the educational institution directly to avoid paying taxes on amounts over $15,000.
Contact France Law
If you have a large estate and would like to create a trust or take advantage of other gift-giving methods to reduce your gift and estate tax, contact a wills and estate lawyer at France Law. We want to discuss the best ways for gift giving throughout your life. Contact us here or give us a call at 850.224.1040 today.