John D. Teter Law Offices



1361 South Winchester Boulevard, Suite 113
San Jose, CA 95128

Understanding Estate Tax and Gift Tax in the United States

 Posted on October 12, 2017 in Taxation Law

gift tax, transfer taxes, San Jose tax attorney, estate tax, gift tax returnIn the United States, we are all too aware of the taxes that affect our everyday lives, such as sales tax and income tax. However, there are additional taxes that apply in special situations, including when someone leaves assets to his or her heirs after their death and when a person gives someone a large gift of money or property. These taxes are known as transfer taxes, and people should be aware of the tax laws that apply in these situations.

Estate Tax

When a person dies, taxes may apply to the transfer of his or her property to his or her heirs. A complete accounting of one’s assets will be made, including cash, real estate, investments, and business interests, using the fair market value of these items. The total value of this property is known as the Gross Estate. Deductions from this amount may apply for debts, expenses related to estate administration, property left to charities, and property left to a surviving spouse.

The value of the gross estate minus any applicable deductions is known as the Taxable Estate. This amount also includes any taxable gifts made during the decedent’s lifetime. If the taxable estate exceeds a certain threshold, an estate tax return (Form 706) must be filed. As of 2017, the filing threshold is $5,490,000.

Gift Tax

The gift tax applies to the transfer of property from one person to another in which the person giving the gift does not receive something of equal value in return. The value of a gift is determined using the fair market value of the property at the time of the transfer. A gift’s donor is typically responsible for paying the tax, and he or she will file a gift tax return (Form 706) for applicable gifts.

Gift tax exclusions apply to gifts below a certain threshold. As of 2017, that threshold is $14,000 per recipient. This exclusion applies to multiple gifts to multiple recipients, so the gift of one or more items totaling less than $14,000 in a single year that is given to any individual person can be excluded from gift taxes. This exclusion is available for all applicable gifts each year. Exclusions also apply to charitable donations, gifts to one’s spouse, gifts to a political organization, and tuition or medical expenses.

Contact an Experienced San Jose, CA Tax Attorney

Determining the applicability and amounts of estate taxes and gift taxes can be a complex matter. In these cases, you need a skilled tax lawyer on your side who can help you correctly apply the law and avoid any penalties. For assistance resolving the legal issues surrounding transfer taxes, contact the knowledgeable San Jose tax attorney at John D. Teter Law Offices by calling 408-866-1810.


Share this post:
BBB ABA State bar of california SCCBA MH 2016
Back to Top