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Wednesday, January 5, 2011

Inflation Updates for 2011

Every year the Internal Revenue Service publishes a list of inflation adjustments. Here are the important ones that relate to Gift and Estate Taxes and others that are just useful:
  1. 2011 Annual Gift Tax Exclusion will stay at $13,000. This means a person can give any other person at least $13,000 before it is subject to the federal gift tax. I won't go into the details about how and when it will qualify - just realize that as long as it is an outright gift, it will usually qualify. Also, a husband and wife may split a $26,000 gift for tax purposes before there is a gift tax.

  2. 2011 Annual Gift Tax Exclusion for Gifts to Non-Citizen Spouses will be $136,000. This is the maximum amount a person may transfer to a non-citizen spouse before the gift is subject to a gift tax. In order for US law to apply, we will usually be talking about a gift being made to a permanent resident alien spouse. One place where this gets triggered unexpectedly by many is retitling of real estate - so be give careful thought to this before changing ownership. This is up from $134,000 in 2010.

  3. The 2011 Federal Estate Tax Exemption will be $5,000,000. We've talked about this before, so it should not be a surprise to anyone that the estate tax exemption is settling at $5,000,000 for the next two years. This means that if you die in 2011, the federal government will not have a death tax on the first $5,000,000 that you pass on (unless you have made large gifts in previous years).

  4. The 2011 Federal Lifetime Gift Tax Exemption will also be $5,000,000 for the next two years. This is in addition to the annual gifts that a person can make. Beware of gifting highly appreciated assets!

  5. 2011 Reporting Requirements for Large Gifts Received from Foreign Persons: recipients of gifts from certain foreign persons may be required to report these gifts under § 6039F if the aggregate value of gifts received in a taxable year exceeds $14,375.

  6. 2011 Mileage Reimbursement Rates: the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
      • 51 cents per mile for business miles driven
      • 19 cents per mile driven for medical or moving purposes
      • 14 cents per mile driven in service of charitable organizations
Source: IRS Rev.Proc. 2010-40 & IR-2010-119 & IRC Section 2001


Ezriel said...

Useful points, thank you. Is it not true in regards to your Point 2 about the annual gift limit to non-US citizen spouses that above and beyond this $136,000/year, US Citizens can also gift additional lifetime amounts of up to $5mm (as noted in your Point 4) in 2011 and 2012. Therefore, a US citizen can transfer a significant amount of an estate over tax-free to a non-US citizen spouse during these next two years? That is an important point worth making as well.

Kevin A. Pollock, J.D., LL.M. said...


Thank you for your comment. You are correct that a US Citizens and resident aliens can, in addition to the annual exclusion amount, up to $5,000,000 to a spouse. This is usually not done though because most people wish to pass the money downstream to children and grandchildren without taxes. If they use up their tax exemption on gifts to the spouses, it could come at a very high price later. Also, if one spouse does wish to give a substantial sum to the other spouse, we try to convince the non-citizen spouse to become a citizen so that he/she will be eligible for the unlimited marital deduction.