Is it more taxing to give or to receive?

Changes to gift and estate taxes

Although it didn’t receive as much publicity as other parts of the American Taxpayer Relief Act of 2012 (ATRA), estate and gift taxes also got a makeover by our representatives.

Congress permanently increased the maximum estate and gift tax rate to 40% for estates of decedents dying after 2012, with an exclusion of $5,000,000, adjusted annually for inflation, using 2010 as a base year. In 2013, the exclusion, adjusted for inflation, is $5,250,000. This exclusion amount can be used to reduce taxes for gifts made during the taxpayer’s lifetime, or, if not used up during the taxpayer’s lifetime, any remaining unused portion can be used to reduce the taxable estate upon the taxpayer’s death. Congress also made permanent the “portability” election between  spouses (so that unused exclusion amounts after the death of the first spouse can be  used upon the death of the surviving spouse).

Another important change, though not a part of ATRA, is that the annual gift exclusion amount (the amount that you can annually give to an individual without generating a taxable gift) increased from $13,000 in 2012 to $14,000 for gifts made in 2013.

These are all federal changes, California does not have an estate or gift tax.