The gift tax law was repealed in New York State for gifts made on or after January 1, 2000. There are only three states that have a gift tax: North Carolina, Connecticut and Tennessee. If you live in New York State the only gift tax that you need to be concerned with is the federal gift tax.
Federal Gift Tax in New York
Under federal law, you are allowed to give up to $1 million in your lifetime before you (the giver) would owe any federal gift tax. Beginning in 2010, if you reach the $1 million mark in lifetime gifts, any gift given after the $1 million has been reached is scheduled to be taxed at a rate of 35%.
The $1 million cap includes cash and other assets, such as stocks, bonds, or property. If you are married, each spouse has their own $1 million gift tax exemption.
- If you file as a single person, you may give up to $13,000 each calendar year per recipient
- If you file as a married couple, together you can give up to $26,000 each calendar year per recipient
As long as the recipient's gift amount does not exceed $13,000 in one year (or $26,000 for a married couple) then no tax is owed.
Education Gifts in New York
There are special rules which encourage contributions to 529 college savings plans. Your gift contributions to a 529 college savings plan will not reduce your $1 million lifetime gift tax exemption as long as it does not exceed your annual maximum gift to that person of $13,000.
- You are allowed to make a lump sum payment in one year, and spread the gift over several years.
- As an example: you can fund a 529 college savings plan with a $39,000 gift and then spread the gift out over three consecutive tax years, beginning with the year the lump sum was given.
- If you gift the recipient of the 529 college savings plan with any additional funds during the three years you are spreading the gift out, you will owe gift tax on the amount over $13,000 each year.
More Tax Exempt Gifts in New York
Since there is no gift tax in New York State, you can make unlimited gifts to the following without owing any federal gift tax or having to file a special Form 709 gift tax return:
- Gifts to pay for the medical expenses of another person as long as the gift or payment is made directly to the doctor or other medical service provider
- If your spouse is a US citizen, you can make unlimited gifts to them
- IRS approved charities
Examples of several New York based charities that are IRS approved charities include:
- National Audobon Society, Inc.
- National Kidney Foundation
- Homes for the Homeless, Inc.
- United Way of Westchester and Putnam, Inc.
- Tourette Syndrome Association, Inc.
Consult a Tax Attorney
If you have any questions regarding taxes that might be owed if you wish to make a gift, or if you are the recipient of a gift and you live in New York State you should contact an experienced tax attorney as soon as possible. There are also different rules for gifts to trusts; estate taxes and gift taxes are often closely entwined. An experienced tax attorney will be an invaluable resource to protect your assets for many years to come.