The 2011 Gift Tax

The tax bill that the President signed on December 17, 2010 raised the estate tax exemption to $5 million. For a married couple, this means that – with relatively simple planning – they can transfer up to $10 million free of estate tax to their heirs.

There is something else in this tax bill. The gift tax exemption is being reunified with the estate tax exemption. This means that you can now gift up to $5 million ($10 million for marrieds) without gift tax. And, starting in 2012, this exemption will be indexed for inflation.  Previously the estate tax exemption was at $3.5 million whereas the gift tax exemption was much lower – at $1 million.

The gift tax rates are remaining the same – 35% for both 2010 and 2011.