Just like most US states, Missouri does not have a Gift Tax. However, it does not mean that being a Missouri resident, you can give away your entire estate one day, avoiding federal taxation.
Liberated from the state gift tax, Missouri residents can still be responsible for federal estate and gift taxes depending on the estate or gift size.
In this article, we shall take a close look at gift taxation applicable for Missouri residents, its peculiarities, and ways to reduce your taxable estate through it.
Table of contents
What is a taxable gift in Missouri?
People often ask whether buying their children a car or making a down payment for a house can be considered a taxable gift. And if yes, who is responsible for the gift tax due?
Let’s put it like this: technically, there are three types of gifts:
- A pro-bono transaction;
- A deal made at a price much lower than the market one;
- An interest-free loan or even the one made at a reduced interest rate.
And while in some states, the one who makes a gift may face up to 40% state gift tax, Missouri residents only object to the federal gift taxation.
However, you won’t have to file a gift tax return form for the following gifts:
- A gift to a spouse who is also a US citizen;
- Payment for a person’s medical treatment and education as long as the funds are being transferred directly to the institution;
- A gift made to an IRS-approved charity.
What is the federal gift tax exclusion?
Not every gift is considered “taxable” on a federal level. The gift tax exclusion provides that a US citizen can make up to $15,000 gifts to as many people as they wish every year.
For example, having two children can give away up to the $30,000 value of your estate, reducing its taxable part. It is essential for Missouri residents who have sufficient estate that becomes an object to federal estate tax, although the state does not have one.
Once you are married, you can “split” a gift with your spouse and make a $30,000 transaction to one person without any consequences for your annual gift tax exclusion or lifetime exemption amount.
Even if you live in Missouri or any other state that does not impose any state gift or estate tax, you can be liable for the federal taxation if your estate is large enough or the value of gifted assets including estate, sticks, or bonds exceeds $15,000 per person annually.
Knowing the principles and rules of the federal gift tax exclusion can help you avoid unpleasant surprises and significantly reduce your taxable estate.