Whoever you are planning on making a gift to someone, it is important to understand gift tax Ohio rules. You do not want to end up with a significant amount of your money being lost to estate taxes just because you decide to make a generous contribution to the people that you love.
Zimmer Law Firm understands the rules for gift taxes and we can help you to make smart choices when it comes to giving gifts both during the course of your lifetime as well as after your death.
The rules for estate and gift taxes are interrelated, so our gift tax Ohio lawyers can also provide important assistance in shielding your assets from being lost after your death when you leave an inheritance as well.
Understanding the Gift Tax Ohio Rules
When you make a gift in Ohio, you are not going to have to worry about any state level gift taxes. There is no specific gift tax assessed within Ohio. The rules used to stipulate that if you made certain types of gifts valued at $10,000 or more within three years before you passed away, the value of the gifts could be pulled back into the estate for purposes of calculating the amount of estate taxes owed. However, in 2013, Ohio repealed the estate tax which the state charged after a death. This means there is no longer a need to worry about state-level estate taxes for anyone who dies after 2013.
This does not mean that no one who lives in Ohio will ever be subject to any gift taxes or to any estate taxes. There is still going to be a gift tax assessed if you give substantial gifts, just as there will still be an estate tax assessed if you transfer a significant amount of wealth after your death. The reason taxes still must be paid is because the IRS imposes taxes which apply to people living in Ohio, as well as in other states across the United States
If you give a gift above the annual exclusion, you end up having to pay the federal gift tax. The annual exclusion for 2015 and 2016 is $14,000. This annual exclusion applies to act donor and to each donee. In other words, if you have two children, you could give each child $14,000 for a total of $28,000 in gifts. Because the gift to each individual recipient did not exceed $14,000, you would not be charged any taxes.
Each spouse is entitled to give away $14,000 to each donee as well. This means when married couples give away property they own together, they can give away up to $28,000 to each recipient without having to pay gift taxes. Two parents together could give each of their children $28,000 per year and there would be no gift taxes assessed.
There are also certain kinds of “gifts” which the IRS doesn’t consider taxable. If you pay tuition expenses directly to a school or medical expenses for someone else, this does not trigger the gift tax. If you make a gift to your spouse or a gift to a political organization for its use, this also does not trigger a gift tax being charged.
If gift taxes are charged, the donor is usually responsible for paying for the gift tax.
Avoiding Gift Taxes and Estate Taxes
The estate and gift tax are considered unified taxes. If you give gifts above the $14,000 annual exclusion, you can opt not to pay the gift tax but instead to take it out of your excludable amount for estate taxes. The excludable amount for estate taxes is $5.45 million as of 2016, so you can give away up to this amount either during your life and after your death without taxes.
There are methods such as the use of trusts which can be used to avoid estate and gift taxes, so you should explore these options with an experienced Ohio estate planning lawyer to protect your assets.
How a Gift Tax Ohio Lawyer Can Help
Zimmer Law Firm is committed to helping clients keep more of their own money, even when making generous gifts during the course of your lifetime and after your death. If you are thinking about giving a gift or if you are preparing your estate plan and determining who will inherit, give us a call as soon as possible so we can protect you from losing assets to the IRS.
You can learn more about gift taxes, estate taxes, and the entire estate planning process by downloading a FREE estate planning peace of mind checklist. You can also give our Cincinnati estate planning lawyers a call at 513.721.1513 to learn more about how gift tax Ohio rules will apply in your situation.