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TAX TALK: Simple Gifting Strategies for Income and Estate Taxes Purposes

Posted by Hal Zemel, CPA, J.D., LL.M. on Aug 15, 2016 8:59:23 AM
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If you have a large estate that is in excess of the 2016 lifetime gift and estate tax exemption of $5.45 million (twice that for married couples with proper estate planning strategies in place), you should consider making gifts during your lifetime to reduce your taxable estate. You can make annual exclusions gifts of up to $14,000 per person ($28,000 if you are married) without using any of your lifetime exemption.

Even if your estate would not be subject to tax today, it’s possible that the estate tax exemption could be reduced in the future or your wealth could increase significantly, and estate taxes could become a concern. Also, gifting assets to low income taxpayers may have income tax benefits (assuming the kiddie-tax does not apply).

That’s why, no matter your current net worth, it’s important to choose gifts wisely. Consider both estate and income tax consequences and the economic aspects of any gifts you’d like to make.

Here are three strategies for tax-smart giving:

  1. To minimize estate tax, gift property with the greatest future appreciation potential. You’ll remove that future appreciation from your taxable estate and use only a portion of the lifetime exemption based on the current gift tax value.
  2. To minimize your beneficiary’s income tax, gift property that hasn’t appreciated significantly while you’ve owned it. The beneficiary will acquire your basis and holding period in the asset, and therefore, can sell the property at a minimal income tax cost.
  3. To minimize your own income tax, don’t gift property that’s declined in value. Instead, consider selling the property so you can take the tax loss. You can then gift the sale proceeds.

For more ideas on tax-smart giving strategies, contact me at or your Berdon advisor.

Hal Zemel, a Tax Principal at Berdon LLP, New York Accountants, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.

Topics: TAX TALK

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