When you give or transfer property while you’re still alive, it’s important to think about the taxes that might be involved. This type of transfer is called an "inter vivos transfer." It's different from passing things on through a will after someone has died, which is called a "testamentary transfer." Here are some important things to remember about the taxes for inter vivos transfers:
Gift Tax: In the U.S., if you give someone property, you might have to pay a federal gift tax. The IRS lets you give a certain amount each year without reporting it. For 2023, this amount is $17,000 for each person. That means you can give up to this amount without any tax forms. You can also give money to different people, and that’s okay too. If you give more than the limit, you may have to fill out a special form called Form 709.
Tax Basis Changes: Another key point is how the value of the property is treated for taxes. With inter vivos transfers, the person getting the property usually takes on the same value that the giver paid for it. This means if they sell it later, they could owe taxes on any profits they make. On the other hand, if someone inherits property, it usually gets its value bumped up to the current market price when the previous owner passed away. This can help lower the taxes if they sell it later.
State Tax Rules: Remember that some states have their own laws about gift taxes or estate taxes. So, it’s important to know the rules where you live.
Understanding taxes for inter vivos transfers can be tricky. It’s always a good idea to talk to a tax expert or a lawyer to make sure everything is done the right way.
When you give or transfer property while you’re still alive, it’s important to think about the taxes that might be involved. This type of transfer is called an "inter vivos transfer." It's different from passing things on through a will after someone has died, which is called a "testamentary transfer." Here are some important things to remember about the taxes for inter vivos transfers:
Gift Tax: In the U.S., if you give someone property, you might have to pay a federal gift tax. The IRS lets you give a certain amount each year without reporting it. For 2023, this amount is $17,000 for each person. That means you can give up to this amount without any tax forms. You can also give money to different people, and that’s okay too. If you give more than the limit, you may have to fill out a special form called Form 709.
Tax Basis Changes: Another key point is how the value of the property is treated for taxes. With inter vivos transfers, the person getting the property usually takes on the same value that the giver paid for it. This means if they sell it later, they could owe taxes on any profits they make. On the other hand, if someone inherits property, it usually gets its value bumped up to the current market price when the previous owner passed away. This can help lower the taxes if they sell it later.
State Tax Rules: Remember that some states have their own laws about gift taxes or estate taxes. So, it’s important to know the rules where you live.
Understanding taxes for inter vivos transfers can be tricky. It’s always a good idea to talk to a tax expert or a lawyer to make sure everything is done the right way.