As of July 1, a new state gift tax took effect.
While it follows some federal gift tax rules, it has implications regarding the state estate laws and tax, according to Gary Hachfeld, University of Minnesota Extension agricultural business management educator.
The state gift tax allows for an annual gift exclusion of $14,000 per person per individual, or $28,000 per couple, per year to any number of persons without any tax. In addition, each individual is allowed a lifetime gift exclusion of $1,000,000 which represents a lifetime gift tax credit of $100,000. Couples can combine their lifetime exclusions as well.
Hachfeld said that gifts in excess of the annual exclusion amounts will require the donor to file an IRS 709 and Minnesota gift tax form. Gifts in excess of the lifetime exclusion amount will also have to file the gift tax forms and the gift will be taxed at a flat rate of 10%.
The Minnesota gift tax only applies to the transfer of property located in Minnesota. It applies to Minnesota residents, and to gifts of real estate and tangible personal property located in Minnesota but owned by any non-resident.
Gift tax due is the responsibility of the donor. Hachfeld noted. However, if the gift tax is not paid when due, the gift's recipient is responsible to pay the tax. The tax is due by April 15 after the close of the calendar year in which the gift was made.
The Minnesota lifetime gift tax exclusion amount of $1,000,000 per person is in addition to the Minnesota estate tax exclusion of $1,000,000.
"Keep in mind there is also a Minnesota Qualified Small Business Property and Qualified Farm Property Exclusion for estates that qualify," Hachfeld added. "It is important to check with your accountant and attorney for information about these issues specific to your situation. Professional assistance is crucial to effective gift and estate planning."