Thursday, November 10, 2011

What Types of Transfers Are NOT Subject to the Federal Gift Tax?

As the temperatures drop and the calendar pushes towards the end year, the giving season is near. Remember, the person who makes a gift may be subject to a gift tax unless it is below the annual exclusion amount (currently $13,000/person/year in 2011) or its is not subject to the tax. Here are three types of transfers (a.k.a gifts) that are not subject to the federal gift tax:
  1. Transfers to political organizations, as defined under Section 527(3)(1);
  2. Transfers to qualifying educational organizations in the form of tuition for education or training. Not included are transfers for books, supplies, room / board, or deposits into 529 college savings plans; and
  3. Transfers for medical treatment so long as that treatment would qualify as a deduction for income tax purposes.
Thanks to R. Chistian Davis, Vice President, Private Client Group, US Bank, Madison, Wisconsin, for discussing this information at the 45th Annual CLEW Tax Workshop, presented by the University of Wisconsin Law School.

Remember, a blog is for discussion, and is not a substitute for legal or tax advice. Please consult your attorney and or tax person for advice specific to your situation.

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