Gay Marriage Monday — The Gift Tax

I am recycling this oldie but goodie of a post from 2010 about gay marriage and the gift tax.  I have tweaked some of the language and updated the dollar amounts for 2011 and 2012, but the core of the article is the same as appeared on the One Iowa website in July 2010.

(Note:  The discussion below also applies to unmarried gay couples and to unmarried straight couples.)

Because the federal government does not recognize gay marriage, same-sex married couples in Iowa (or any other state that allows gay marriage) could face federal gift tax issues when transferring property to each other.

There is a limit on the dollar amount of gifts you can give another person tax-free: $13,000 per person annually (for 2011 and 2012). This means you can give up to $13,000 to any one person without being required to file a Gift Tax Return.

Gifts of any size can be given to a spouse without being subject to gift tax, but this is not something same-sex married couples can take advantage of.

For example, let’s say Jill and Joan are married same-sex couple. Joan owns the house they live in, and the title to the house is in Joan’s name only. The house has a fair market value of $100,000. Joan decides to put Jill’s’ name on the title of house. The federal government would consider this a taxable gift of $50,000 from Joan to Jill, and Joan would have to file a Gift Tax Return.

The $13,000 threshold applies both to cash and non-cash gifts, including houses, cars, bank accounts, etc., and applies only to the givers of gifts. Recipients are not subject to tax on gifts received.

Amounts paid to support a same-sex spouse in a state that recognizes same-sex marriage are probably not taxable gifts at the state level (and it should be noted that Iowa does not have a gift tax).