tax

2007-08 estate and gift tax amounts

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In addition to the annual exclusion amounts, you also can give the following without triggering the gift tax:

  • Charitable gifts.
  • Gifts to a spouse who is a U.S. citizen. Gifts to foreign spouses are subject to a limit of $125,000 in 2007 and $128,000 in 2008. This amount is indexed for inflation.
  • Gifts of educational expenses are unlimited as long as you make a direct payment to the educational institution for tuition only. Books, supplies, and living expenses do not qualify.
  • You also do not need to include amounts that were used to pay for medical costs as long as they were paid directly to the medical facility.

Unified credit
In estate planning, you also must consider the unified credit. This is the credit for the portion of estate tax due on taxable estates. For 2006-2008, the unified credit for estate tax purposes is $780,800, which is the amount that eliminates tax liability for estates worth $2 million.

You must subtract the unified credit from any gift tax that you owe. Gift taxes don't kick in until after you have given away $1 million over your lifetime. This exclusion applies for tax years through 2009. Any unified credit you use against your gift tax in one year reduces the amount of credit that you can use against your gift tax in a later year.

The total amount used during life against your gift tax reduces the credit available to use against your estate tax.

Unified credit
Year in which a gift is made or a decedent dies
Unified credit for gift tax purposes
Unified credit for estate tax purposes
2005$345,800$555,800
2006, 2007 and 2008$345,800$780,800
2009$345,800$1,455,800

-- Updated: Jan. 2, 2008

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