People love making and receiving gifts. And when it comes to sufficient transactions, many might have heard about gift taxes. However, hardly does anybody know for sure how they work and when do they become relevant.
At the same time, once you happen to have sufficient property in Idaho, knowing the principles of state and federal gift taxation can even help you reduce your taxable estate, easing the fiscal burden.
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State and federal gift taxes in Idaho.
While Idaho does not impose a state gift tax on its citizens, and its estate tax expired in 2004, you can still become responsible for paying a federal gift tax due.
It is essential to understand that gift is not considered income, and therefore the one who makes the present, not the one who receives it, has to pay gift tax if it meets the criteria.
What is a gift, and what are the criteria of gift taxation for Idaho residents?
Any sum of money or estate that you give another person, not expecting anything in return, is a gift. From this point, even an interest-free money loan is technically a gift.
Most people have never even heard of gift taxes being residents of Idaho and several other states that don’t impose local gift taxes. However, once your gift exceeds the $15,000 federal gift tax exclusion bar, you will instantly become responsible for the federal gift tax due.
Most taxpayers simply don’t make such transactions and therefore never have to deal with the gift tax. However, once you have sufficient estate and start thinking about estate planning, understanding the principles of federal gift tax exclusion and lifetime exemption can significantly ease your federal taxation burden.
Gifting away your estate in Idaho
The first thing you should know is that you can gift up to $15,000 to as many people as you want every year.
Moreover, if you are married, you can “split” costly gifts with your spouse without taxation consequences for both of you.
Suppose you are married and have three children. It means that you can easily gift away $45,000 each and $90,000 together. And you can repeat those transactions annually, not having to fill the tax return form for them.
And although Idaho residents don’t have to deal with the state estate tax from January 1, 2005, sufficient properties remain subject to federal taxation.
Gifting away your estate gradually throughout several years, you will manage to minimize the taxable estate, preserving your legacy for heirs.
How to Legally Avoid the Idaho Gift Tax
There following is a list of planning strategies that you can consider to reduce any gift tax issues. Make sure to consider the following:
- Donor-Advised Funds
- Irrevocable Life Insurance Trust (ILIT)
- 529 Plans
- Direct Medical and Tuition Payments
- Gifts Below Annual Exemption
- Crummey Trusts
- Minor Trusts
- Dynasty Trusts
- Family Limited Partnerships (FLPs)
- Charitable Remainder Trusts (CRUT)
- Grantor Retained Income Trusts (GRIT)
- Intentionally Defective Grantor Trust (IDGT)
- Charitable Gift Annuity
- Qualified Personal Residence Trusts (QPRTs)
- Grantor Retained Annuity Trusts (GRATs)
- Grantor Retained Unitrusts (GRUTs)
- Qualified Terminable Interest Property (QTIP)
