Tax Considerations When Gifting Cash or Property to Others

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Those who pass money or property on to others during their lifetime may encounter an estate, federal, and state gift tax. The same holds for assets passed on after death, which may entail generation-skipping federal transfer (GST) taxes.

The 2012 Tax Act provided an exclusion baseline for estate taxes that reached $5.49 million in 2017, with the amount under this considered tax-exempt. Taking effect in 2018, the Tax Cuts and Jobs Act doubled the exclusion to $11.18 million. With the amount increasing each year, reflecting projected inflation and cost of living increases, it reached $12.92 million in 2024. However, it’s important to note the 2017 level. After fiscal year 2025 (barring a legislative move to extend the current level), the exempt amount is scheduled to revert to the baseline pre-2018 level of $5.49 million again.

Certain transfers are tax-free, including gifts of as much as $185,000 to a US citizen spouse and $18,000 to any other single person or entity. The latter exemption is doubled to $36,000 in cases where both US citizen spouses give the gift. Also tax exempt are amounts paid for another’s tuition to an education institution and that paid to any medical care provider for someone’s care.

GST taxes are imposed on transfers made (in life or upon passing) to those at least two generations below one, such as a grandchild. Imposed on top of the federal gift and estate tax is $13.61 million in 2024. It’s set at a flat tax equivalent to the highest estate tax bracket applicable for the year the transfer is made. This is 40 percent for 2024 and applies to every transfer above the $13.61 million exemption amount.