Gifts, Estate & Capital gain tax

    What is the gift tax?

    When you give a certain amount of money or other property to someone, it is considered a gift — whether or not you intended it that way. Such gifts are subject to a tax. Here is how the IRS defines the gift tax:

    “The gift tax applies to the transfer by gift of any type of property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.”

    Typically, the person giving the “gift” is responsible for paying the tax. In 2022, giving property to someone that exceeds $16,000 in value makes the transfer subject to the gift tax.

    There are several situations where the gift tax does not apply, including:

    1. -Gifts to a spouse
    2. -Gifts that pay the tuition or medical expenses of someone
    3. -Gifts to a political organization intended for its use.


    The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death. The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.

    Once you have accounted for the Gross Estate, certain deductions (and in special circumstances, reductions to value) are allowed in arriving at your "Taxable Estate." These deductions may include mortgages and other debts, estate administration expenses, property that passes to surviving spouses and qualified charities. The value of some operating business interests or farms may be reduced for estates that qualify.

    After the net amount is computed, the value of lifetime taxable gifts is added to this number and the tax is computed. The tax is then reduced by the available unified credit.

    Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return. A filing is required if the gross estate of the decedent, increased by the decedent’s adjusted taxable gifts and specific gift tax exemption, is valued at more than the filing threshold for the year of the decedent’s death, as shown in the table below.


    Chances are good that you are sitting on a mountain of capital assets. These are things that you own either for personal use or for the purposes of investment. Among the many examples of capital assets are:

    1. -A home,
    2. -Household furnishings,
    3. -Stocks and bonds

    When you sell one of these assets, you generally owe a capital gains tax on “the difference between the adjusted basis in the asset and the amount you realized from the sale,” according to the IRS. In most cases, this “adjusted basis” is the price you paid for the item.

    Generally, you must hold a capital asset for more than one year before selling to qualify for the long-term capital gains rate. This is just 15% for most people, although it is higher in some situations, particularly for those whose taxable incomes cross specific thresholds.

    If you sell a capital asset before one year, you are stuck with a short-term capital gain, and you usually pay much higher taxes, depending on your income.

    Depending on where you live, achieving that goal can be difficult, or relatively easy. In fact, 33 states have no estate or inheritance taxes.

    But 12 states and the District of Columbia levy estate taxes, and six levy inheritance taxes — although one state is in the process of repealing its inheritance tax.

    And pity the poor residents of the alleged “Free State” — Maryland levies both types of taxes.

    The full list of such states, and the District of Columbia, in each category is as follows:

    States with estate taxes

    1. Connecticut
    2. District of Columbia
    3. Hawaii
    4. Illinois
    5. Maine
    6. Maryland
    7. Massachusetts
    8. Minnesota
    9. New York
    10. Oregon
    11. Rhode Island
    12. Vermont
    13. Washington

    States with inheritance taxes

    1. Iowa (The tax was repealed this year and will phase out through 2024.)
    2. Kentucky
    3. Maryland
    4. Nebraska
    5. New Jersey
    6. Pennsylvania


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