Who Pays Gift Tax In 2023?
Introduction
Gift tax is a federal tax imposed on the transfer of money or property from one individual to another. The person who gives the gift is typically responsible for paying the gift tax. In 2023, the gift tax rate is 37%, but there are certain exemptions and exclusions that may reduce or eliminate the amount of taxable gifts. In this article, we will discuss who pays gift tax in 2023 and how to calculate the gift tax.
Who Pays Gift Tax?
In 2023, the gift tax is paid by the person who makes the gift. For instance, if you give a family member a cash gift, you will be responsible for paying the gift tax. The amount of the gift tax is based on the gift's value and the amount of the person's lifetime gift tax exemption. The lifetime gift tax exemption is $11.7 million in 2023.
Gift Tax Exclusions
The gift tax does not apply to all gifts. There are certain gifts that are excluded from the gift tax. These include gifts to a spouse, gifts to charities, and gifts of up to $15,000 per person per year. Additionally, you can give an unlimited amount of money to certain educational and medical institutions without incurring a gift tax.
Calculating Gift Tax
If the gift you give is subject to the gift tax, you will need to calculate the gift tax. To do this, first determine the value of the gift. Then subtract any applicable gift tax exclusions from the value and subtract the lifetime gift tax exemption amount. The remaining amount is the taxable amount of the gift and the gift tax rate for 2023 is 37%. Multiply the taxable amount by 37% to determine the amount of gift tax due.
Gift Tax Returns
If you are required to pay gift tax, you must file a gift tax return with the IRS. The gift tax return must be filed by April 15th of the year following the year in which the gift was made. The return must include information about the gift, the donor, the recipient, and the amount of the gift tax. The gift tax return must be accompanied by payment of the gift tax due.
Gift Tax Planning
You can reduce or eliminate the amount of gift tax you owe by taking advantage of the gift tax exclusions and the lifetime gift tax exemption. For instance, you can give up to $15,000 to an individual per year without incurring a gift tax. You can also spread out your gifts over several years to take advantage of the lifetime gift tax exemption. Additionally, you can make gifts to charitable organizations to reduce the amount of gift tax you owe.
Gift Tax Credits
In addition to the lifetime gift tax exemption, you may be able to take advantage of additional gift tax credits. For instance, if you make a gift to a qualifying charitable organization, you may be able to take a gift tax credit. Additionally, if you make a gift to a qualifying educational or medical institution, you may be able to take a gift tax credit. Gift tax credits can reduce or eliminate the amount of gift tax you owe.
Conclusion
In 2023, the gift tax rate is 37% and the lifetime gift tax exemption is $11.7 million. The person who makes the gift is responsible for paying the gift tax. There are certain gifts that are exempt from the gift tax, such as gifts to a spouse, gifts to charities, and gifts of up to $15,000 per person per year. Additionally, you can take advantage of gift tax credits and the lifetime gift tax exemption to reduce or eliminate the amount of gift tax you owe. It is important to understand the gift tax laws to ensure that you are in compliance with the law.