Tags: taxes | gifts | Congress | limit

Tax-Free Gifts Quadrupled in US When Congress Raised Limit

Monday, 27 Jan 2014 01:20 PM

Congress voted in December 2010 to let wealthy Americans make tax-free gifts of as much as $5 million, and the money flowed.

U.S. taxpayers reported making $122 billion in nontaxable gifts on the returns they filed in 2012, more than four times the amount they made in each of the two previous years. The Internal Revenue Service released the data today.

Most of the money, $84 billion, came in the form of gifts exceeding $1 million, and those were made by fewer than 30,000 people, according to the IRS. The data cover tax returns filed in 2012. Typically, gift tax returns are due on April 15 of the year after the gift.

The law created a chance for wealthy families to move assets out of their estates and let their heirs benefit from any appreciation in value, said Lisa Featherngill, a managing director at Abbot Downing, a wealth-management unit of Wells Fargo & Co.

“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.”

All six of Featherngill’s direct clients, who generally have at least $50 million in investable assets, made large gifts in 2011 or 2012, she said.

The 2010 law increased the lifetime gift-tax exclusion to $5 million from $1 million. Republicans, including then-Senator Jon Kyl of Arizona, won favorable language on estate and gift taxes in exchange for agreeing to cut payroll taxes and extend tax credits for college tuition and low-income families.

Temporary Law

The 2010 law was temporary and was scheduled to expire in December 2012, and estate planners encouraged their clients to make gifts soon in case Congress changed the law.

In January 2013, Congress extended the gift tax changes and permanently linked them to inflation. The exclusion this year is $5.34 million per person.

The gift tax is designed to prevent people from avoiding the estate tax by making gifts to heirs during their lifetime. The top gift tax rate was 35 percent from 2010 through 2012. It is now 40 percent.

The lifetime exclusion applies on top of an annual gift tax exclusion, which is now $14,000.

© Copyright 2017 Bloomberg News. All rights reserved.

 
1Like our page
2Share
Economy
Congress voted in December 2010 to let wealthy Americans make tax-free gifts of as much as $5 million, and the money flowed.
taxes,gifts,Congress,limit
361
2014-20-27
Monday, 27 Jan 2014 01:20 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved