If you give someone money or property during your life, you may be subject to federal gift tax. The money and property you
own when you die (your
estate) may be subject to federal estate tax. The purpose of this publication is to give you a general understanding of when
these taxes apply and
when they do not. It explains how much money or property you can give away during your lifetime or leave to your heirs at
your death before any tax
will be owed.
No tax owed.
Most gifts are not subject to the gift tax and most estates are not subject to the estate tax. For example, there
is usually no tax if you make a
gift to your spouse or if your estate goes to your spouse at your death. If you make a gift to someone else, the gift tax
does not apply until the
value of the gifts you give that person exceeds the annual exclusion for the year. See
Annual exclusion under
Gift Tax, on page
4.
Even if tax applies to your gifts or your estate, it may be eliminated by the unified credit, discussed later.
No return needed.
Gift tax returns are filed annually. However, you do not need to file a gift tax return unless you give someone, other
than your spouse, money or
property worth more than the annual exclusion (discussed on page 4) for that year. An estate tax return generally will not
be needed unless the estate
is worth more than the applicable exclusion amount for the year of death. This amount is shown in the table under
Unified Credit (Applicable
Exclusion Amount), on page 3.
No tax on the person receiving your gift or estate.
The person who receives your gift or your estate will not have to pay any federal gift tax or estate tax because of
it. Also, that person will not
have to pay income tax on the value of the gift or inheritance received.
No income tax deduction.
Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot
deduct the value of gifts you
make (other than gifts that are deductible charitable contributions).
What this publication contains.
If you are not sure whether the gift tax or the estate tax applies to your situation, the rest of this publication
may help you. It explains in
general terms:
-
When tax is not owed because of the unified credit,
-
When the gift tax does and does not apply,
-
When the estate tax does and does not apply, and
-
When to file a return for the gift tax or the estate tax.
This publication does not contain any information about state or local taxes. That information should be available from your
local taxing
authority.
Where to find out more.
This publication does not contain all the rules and exceptions for federal estate and gift taxes. It does not contain
the rules that apply to
nonresident aliens. If you need more information, see the following forms and their instructions:
-
Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, and
-
Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.
To order these forms, call 1-800-TAX-FORMS (1-800-829-3676). If you have access to TTY/TDD equipment, you can call 1-800-829-4059.
To get these
forms with your personal computer or by fax, see the first page of this publication.
