We have many clients in Wyoming who inquire about the Wyoming gift tax. Gift tax rules are complex, and estate attorneys and CPAs often misunderstand them.
This guide will break down how the gift tax rules work and give you a few tips along the way.
What is the gift tax and how does it work?
A gift is defined as any transfer where fair value consideration was not received back in return. The transfer itself can be direct or even indirect. It is also measured monetarily.
The gift tax is a tax on a transfer that is made over the IRS exemption amount. The gift tax will also apply to the transfer of stocks, mutual funds, or real estate. It doesn’t have to just be cash.
Wyoming Gift Tax
But I’ve got some good news for you. Wyoming, in fact, does not impose a gift tax on its residents.
This situation is not really that unusual. There are only a dozen states with an estate tax, and very few actually have a gift tax. In many state situations, taxpayers can simply give away their entire estate in order to avoid any estate tax at the state level.
What is the annual gift tax exclusion?
The federal gift exclusion allows a person to gift away up to $15,000 per year and per person. This can be done to as many people as desired with no requirement to file a gift tax return. In addition, those gifts will not count against the lifetime exemption limit.
Let’s take a couple who have three children. Each spouse may gift away $15,000 to each child per year. This is $45,000 for each spouse. Remember that they can do this each year.
Tax Return Requirements, Rules & Limit
When a taxable gift is made above the annual exclusion, the taxpayer must file IRS Form 709. A few issues to consider:
- The gift return will be required even though you may not owe any tax, thanks to the lifetime exemption amount.
- The return is due by the April 15th deadline in the year after the gift was made.
Married couples cannot simply file a “joint” gift tax return. Each spouse has to file a separate gift tax return if any taxable gifts are made.
Fortunately, married couples can “split” the gifts. When a split gift is made, you are able to take advantage of your own annual gift tax exclusion and also your spouse’s exclusion for a gift made entirely by you.
Most folks will not have an issue, but it does make sense to understand the rules. The tax will only impact fewer than 1% of all taxpayers. But you can still be required to file a gift tax return even if you don’t owe any gift tax.
If you have a large estate, making annual gifts up to the exemption amount is a great way to lower your estate.