With the holidays upon us, naturally we all think of the old adage, “it is better to give than to receive.”  From a tax standpoint, this has never been more true than in 2011!

 Let’s start with gifts to individuals.  For several years now, the annual federal gift tax exclusion amount has been set at $13,000.  This means you can give as many gifts as you like to as many people as you like without any tax ramifications at all (no tax owed by you, no tax owed by the gift recipient, and no tax return filing) so long as you do not give cash or property worth more than $13,000 to any one person.

 If you would like to give more than $13,000 to someone, you can use your lifetime federal gift tax exclusion amount to avoid paying federal gift tax, but you will need to file a Form 709 gift tax return with the Internal Revenue Service by April 15 of the following year to declare the gift.  The good news is that for 2011, your lifetime gift tax exclusion amount is at an all time high of $5,000,000.  This amount increases to $5,120,000 for 2012!  Any amount given away by you during your lifetime reduces your taxable estate at death.  Many people are taking advantage of this windfall given taxpayers by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 passed by Congress last December to reduce their estates and avoid federal taxes of anywhere from 35% to 55% being levied on assets being passed down to family members.

 For gifts to charities, donors age 70 ½ and over can now give up to $100,000 from a traditional IRA directly to the charities of their choice without incurring taxes.  Under prior law, donors had to first include all IRA distributions to charities as income and then report a charitable income tax deduction for the gifts. 

 People often ask me, “what about state gift tax?”  The good news is that there is no state gift tax of any kind inWisconsin, and there appears to be no effort to reinstate such a tax, last seen in 1992, for the foreseeable future.

 So this year, be generous to those you love and those charities you support, and save you and your family from lots of taxes!  Be sure to see your tax advisor or estate planning counsel for more advice, particularly if you plan to make a large gift before the end of this year.   

 Atty. William F. Greenhalgh is a member of WealthCounsel LLC and has been engaged in the private practice of law for the last thirty-two years. For more information, call (608) 355-0907.

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