Although people make and receive gifts all the time, gift taxation remains unclear not only for the taxpayers themselves but also for some CPAs and legal advisors.
In this article, we shall have a brief overview of gift tax in Oklahoma and on the federal level.
What is a gift, and when does it become taxable?
Once you are curious whether you are making or receiving a taxable gift, it is essential to remember the following:
- It is the donor (the one who makes the gift) who is responsible for the gift tax due;
- Oklahoma does not impose gift taxation on its residents;
- Only gifts that exceed the $15,000 value are considered taxable on a federal level.
In other words, living in Oklahoma, you won’t have to pay the gift tax unless the value of the gift that you make is higher than $15,000. In this case, you become responsible for the federal gift taxation.
Federal gift tax exclusion
The federal gift tax exclusion makes the taxation applicable only for sufficient gifts that exceed the $15,000 value. However, you can make such gifts to as many people as you want and do so every year.
Moreover, gifts made between two spouses, to IRS-approved charities, or payments for someone’s medical treatment and education are not considered taxable transactions even if they exceed the $15,000 frame.
However, once you are married, you can “join forces” with your spouse, making a $30,000 to one person without becoming responsible for the Federal Gift Tax due.
Oklahoma residents who have sufficient property in the state can benefit from those principles and reduce the taxable part of their estate.
Although Oklahoma does not have a state-level estate tax, your legacy can still become a subject for the federal estate tax. However, this situation applies only to the estate that exceeds the federal estate tax exemption, which is $11.7 million for 2021.
And just like with the gift tax exclusion, federal estate tax exemption is doubled if we are talking about a married couple.
There are at least 2 ways how you can benefit from Oklahoma’s state-level gift and estate taxation and the federal gift tax exemption:
- Transfer a part of your estate to your spouse, making sure that none of you leaves behind more than $11.7 million value property in case of death in 2021;
- Gift away your estate gradually to your children or other heirs, observing the $15,000-per-person annual tax exclusion limit.
Starting to plan your estate in advance and consulting a qualified professional, you will manage to benefit most from your local tax legislation and preserve your legacy for heirs.