Does My Gift Count Towards the Gift Tax Rates?

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The government is really putting these laws into place so people can’t find a way to give away a lot of money to avoid the federal gift tax which is the tax people are hit with when receiving money as an inheritance. You are going to be taxed one way or another.

You can either space it out the gifts in amounts less than $13,000 before you die, or leave money as an inheritance and pay the estate tax. Of course there are always ways to get around some forms of taxation. You can give money directly to a college to pay the tuition of a friend, or relative which will be tax free. You can always donate to charity which is tax free and you can pay medical bills for people, which is also tax free.

The Gift Tax and the Estate Tax

The gift tax is a monetary gift given before you die and the Estate Tax is placed on monetary gifts bequeathed to loved ones after you die. Your estate is the total value of everything you own when you die after you have subtracted your debts. If happen to have an estate worth more than 3.5 million in the year 2009, any amount beyond that 3.5 million will be subject to estate tax which can go as high as 45%. In the year 2010 the exclusion amount will drop to 1 million dollars.

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