• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Ambler Keenan Mitchell Johnson

Estate Planning Law Firm

CALL US TODAY 303-407-1542
  • Home
  • Our Firm
    • About Our Firm
    • About The American Academy
    • Awards and Recognition
    • Advantages of Working With Our Firm
    • Attorney and Staff Profiles
    • Client Testimonials
    • Mission Statement
  • Services
    • Asset Protection & Business Planning
    • Estate and Gift Tax Figures
    • Estate Planning Services
    • Family-Owned Businesses & Farms
    • Incapacity Planning
    • IRA & Retirement Planning
    • Legacy Planning
    • LGBTQ Estate Planning
    • Pet Planning
    • SECURE Act
    • Special Needs Planning
    • Trust Administration & Probate
  • Seminars
  • Elder Law
    • Are You A Caregiver
    • Coping With Alzheimer’s
    • Guardianship & Conservatorship
  • Resources
    • Estate Planning Articles
    • Estate Planning Resources
      • Estate Planning Checkup
      • Is Your Estate Plan Outdated?
      • Reports
        • Advanced Estate Planning
        • Basic Estate Planning
        • Estate Planning for Niches
        • Trust Administration
      • Top 10 Estate and Legacy Planning Techniques
    • Frequently Asked Questions
      • Estate Planning FAQ’s
      • Frequently Asked Questions for Families Without an Estate Plan
      • Legacy Wealth Planning FAQ’s
      • LGBTQ Estate Planning Frequently Asked Questions
      • Trust Administration & Probate Frequently Asked Questions
    • LGBTQ+ Resources
    • Multimedia
    • Newsletters
    • Speaker Connection
    • Special Needs Resources
    • Trust Administration & Probate Resources
      • Bereavement Resources
      • How to Know if You Need Extra Help With Your Grieving
      • The Mourner’s Bill of Rights
      • Things You Need To Do When a Loved One Passes Away With a Trust
      • Things You Need To Do When a Loved One Passes Away With a Will
      • Trust Administration & Probate Definitions
  • Contact Us
  • BLOG
Home Estate Planning Articles Understanding the Federal Gift Tax and its Implications

Elizabeth D. Mitchell March 17, 2020

Understanding the Federal Gift Tax and its Implications

Understanding the Federal Gift Tax and its Implications

 Compliments of Our Law Firm,

Ambler | Keenan | Mitchell | Johnson

Written By: The American Academy of Estate Planning Attorneys

The reality is that few Americans will ever have to worry about the federal gift tax. The reason is simple: Federal gift taxes are calculated only on very large gifts you make. The exemption for 2020 is $11,580,000. In 2026, the exemption is $5,000,000, adjusted for inflation. This means until your collective gifts reach these dollar amounts, you don’t have to worry about the federal gift tax.

Still, it’s always a good idea to understand the dynamics and be prepared, even if the federal gift tax doesn’t seem relevant today. Understanding what federal gift taxes are – and what they’re not – is always good information to know.

For the sake of the tax, a gift is defined as any transfer for which the giver receives nothing in return, or a transfer at less than fair market value. Fair market value is simply the price at which an asset would sell when there is both a willing and knowledgeable buyer and seller. The person who makes the taxable gift is responsible for filing the gift tax return and paying any taxes that are owed. For example, if you sell your car to your best friend for $10 and its fair market value is $5,000, you are responsible for the taxes on the $4,990 gift.

So now that we know what constitutes a taxable gift, what type of gifts aren’t included?

  • Any gifts less than the annual exclusion amount (currently at $15,000 per person to any individual in 2020)
  • Tuition paid directly to the educational institution. Note: this does not include books, supplies, apartments or other living expenses
  • Medical expenses paid directly to a doctor, hospital, or other medical entity
  • Gifts to your spouse (if your spouse is a U.S. citizen)
  • Political donations
  • Charitable donations

Remember: federal estate taxes are calculated at the time of death considering any taxable lifetime gifts. Even then, federal estate taxes are calculated only on the amount exceeding the exempt amount. Worth noting is that the current gift tax rate is 40 percent.

Whether it’s giving to a worthy cause, helping a loved one in their time of need or ensuring our estate plans serve the role of providing for others after we’re gone. Gifting is an important element of life to many of us. An experienced estate planning attorney can help you meet those goals and also ensure there are no vulnerabilities in your plans. While the federal estate tax can be a bit confusing, don’t allow it to sway you from gifting to the causes that are important to you.

Primary Sidebar

Download our Free Estate Planning Worksheet

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.
  • This field is for validation purposes and should be left unchanged.

News

The Importance of Having an Estate Plan

We all know that we should create an Estate Plan, yet so many of us procrastinate in undertaking such an important task. Creating an Estate Plan … [Read More...] about The Importance of Having an Estate Plan

Tis the Season for Giving

Most taxpayers understand that to receive the benefit of charitable deductions, they need to itemize their income tax deductions. Creating a … [Read More...] about Tis the Season for Giving

Tax Planning for 2023

Planning is important for your income taxation during life as well as for any estate tax at death. Even though 2023 is just starting, it’s not too … [Read More...] about Tax Planning for 2023

Office Hours

Monday7:30 AM - 5:00 PM
Tuesday7:30 AM - 5:00 PM
Wednesday7:30 AM - 5:00 PM
Thursday7:30 AM - 5:00 PM

Where we are

Ambler Keenan Mitchell Johnson
950 S. Cherry St., Suite 1650
Denver, CO 80246
United States (US)
Phone: (303) 407-1542
Fax: (303) 321-1899

Map

map for Ambler Keenan Mitchell Johnson office

© 2023 · American Academy of Estate Planning Attorneys, Inc. | Disclaimer | Privacy Policy | Sitemap | Contact Us