Colorado Estate and Gift Tax
The current size of your taxable estate determines which tools are best suited to your situation. For the year 2014, Gift Taxes are only levied on gifts when the gift giver has given more than $5,340,000 in his lifetime (excluding the annual exemption). For the year 2014, Estate Taxes are only levied on estates in excess of $5,340,000 (any lifetime gifts over the annual exemption will reduce this amount by the total amount of the gift(s)). Currently, more than 99.5% of Americans will NOT be subject to either Gift or Estate Tax.
Gift Tax- Under current federal tax law, each person may give up to $14,000 per recipient, per calendar year to an unlimited number of recipients with no need of reporting the gifts. This amount is indexed for inflation and all gifts must be of a “present interest” to qualify (i.e. the immediate use and enjoyment of the recipient must not be deferred in any way.) Gifts above this amount are reportable and count against your overall lifetime (and at death) limit. No tax is payable until you exceed this limit. For 2014, that limit is $5,340,000. For all practical purposes, you can give as much as you want and there will be no tax payable, although there may be a reporting requirement if you exceed the $14,000 annual amount. Though the recipient will not be subject to any gift tax, you need to take into account the issue of “cost basis” – when you give a gift, the cost basis you have in the property or item being transferred goes with the gift and becomes the cost basis for that item by the recipient whenever it is sold. Cash has no basis.
Estate Tax- This is a Federal tax on estates over $5,340,000 (in 2014, adjusted annually for inflation). Married couples can use “Portability” to double this amount. Each state differs with regard to their estate and inheritance tax but, there is no current Colorado estate or inheritance tax. If you own real estate in another state, it may be subject to that state’s estate or inheritance tax with differing threshold amounts and tax rates.
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