Is there a tax on the transfer of assets as a gift?
The short answer is Yes, unless there is an exception.
The general rule is that "a tax is imposed for each calendar year on the transfer of property by an individual, resident, or non-resident." See 26 USCS § 2501.
If a gift is made in property, the value the property at the date of the gift shall be considered the amount of the gift. Importantly, the first $10,000 of such gifts to such person shall not be included in the total amount of gifts made during such year. See 26 USCS § 2503
In determining whether or not you have made a taxable gift there are several questions that you will want to ask:
Have you transferred property by gift?
Is that gift complete?
Is the gift tax exclusion applicable?
Are any gift tax deductions applicable?
Gifts are taxed at the same rates as an individual’s estate. See I.R.C. §§ 2502(a), 2001(c).
For 2022, the federal gift tax is $345,800 on the first $1,000,000, and 40% of the amount over $1,000,000. For the comprehensive tax tables and rates, consult the Instructions to Form 709.
However, the gift tax is cumulative as the total of all prior taxable gifts (those gifts made by the donor, excluding the present gift on which the tax is being calculated, since June 6, 1932) is added back to the present year’s gift in order to determine the applicable gift tax rate. See I.R.C. § 2502(a), (b).
Although the federal gift tax is applicable to all gifts you make during your lifetime, gifts are only taxed when their total value is in excess of what you are allowed to gift during your entire lifetime which is $11.58 million in 2020 per individual ($23.16 million per married couple), $11.70 million in 2021 per individual ($23.40 million per married couple), and $12.06 million in 2022 per individual ($24.12 per married couple). This applicable exclusion amount is coupled with the annual gift tax exclusion ($15,000 per recipient in 2020 and 2021, increasing to $16,000 per recipient in 2022) which is not counted against the applicable exclusion amount. In addition, there are various other gifts that are exempt from the gift tax calculation.
In general, a gift made by one spouse to any person other than his spouse shall, for the purposes of this chapter (26 USCS §§ 2501 et seq.), be considered as made one-half by him and one-half by his spouse, but only if at the time of the gift each spouse is a citizen or resident of the United States.