There are several changes to the federal gift and estate taxes for 2009. The estate tax exemption has been raised. The annual gift exclusion has also been raised, although the lifetime total gift exclusion remains the same. The short form of the Gift Tax Return is obsolete.
Beyond 2009, the repeal of the estate tax is in doubt, given the current economic and political climate.
(Note: The difference between estate and gift taxes is that estate taxes are paid on transfers of property after the owner has died, while gift taxes are paid on transfers of property by someone who is living.)
* Estate Tax Exemption Raised *
The amount of an estate that is exempt from federal estate tax has been raised from two million dollars to three-and-a-half million dollars, for decedents that die on or after January 1, 2009.
* Gift Exclusion Raised *
The amount of money you can give away as a gift to an individual without having to pay gift tax has been raised from $12,000 to $13,000 per calendar year, starting with gifts given on or after January 1, 2009.
You may give up to $13,000 to as many different individuals as you wish, up to a lifetime total of one million dollars, without having to pay gift tax. (The one million dollar total exclusion is unchanged from last year.)
* Must Use the Long Form of the Gift Tax Return *
The Short Form of the Gift Tax Return, Form 709-A is obsolete. All filers who file the Gift Tax Return must use the long form, Form 709.
* Looking Further Down the Road *
Current federal law (as of February 2009) calls for the federal estate tax to be eliminated completely in 2010 for one year (with a sunset provision calling for it to be reinstated in 2011 with an exemption of one million dollars).
During the presidential campaign, Obama said that he was against repealing the estate tax and that he was in favor of making the three-and-a-half million dollar exemption permanent.
It’s possible that given the current economic problems, Congress may come up with an even lower exemption.
In any case, the previously planned total repeal of the estate tax appears doubtful at this point, and you shouldn’t count on it going into effect in 2010.
* More Information *
For more information on changes to the estate and gift taxes, see IRS: What’s New Estate and Gift Tax
For general information on estate and gift taxes, see Nolo Press Estate and Gift Tax FAQ.
You can also call the Internal Revenue Service with your estate and gift tax questions at (800) 829-1040.