The following changes to US gift, estate and individual income taxes should be taken into consideration when determining planning strategies for 2009. Some of these provisions are new, while others represent increases in certain limits that were in effect in 2008. The lifetime gift tax applicable credit amount remains the same, and the IRA charitable rollover provision has been extended from 2008 to 2009.
- The gift tax annual exclusion amount has been raised to $13,000 per donee. These annual exclusion gifts may be made by a donor to an unlimited number of donees. Moreover, a donor may make annual exclusion gifts of $26,000 per donee if the donor's spouse consents to split the gifts. A gift tax return must be filed for the donor's spouse to make this election. Annual exclusion gifts are neither taxed nor do they utilize any portion of the donor's lifetime gift tax applicable credit amount.
- The lifetime gift tax applicable credit amount for gift tax purposes shelters a total of $1 million in otherwise taxable gifts in excess of the annual exclusion amount from gift tax. This gift tax applicable credit amount is not a change for 2009; it has been in effect since 2002. Lifetime gifts, other than annual exclusion gifts, that exceed a cumulative total of $1 million or more are subject to gift tax.
- For 2009, the estate tax applicable credit amount can shelter $3.5 million of otherwise taxable testamentary transfers, less any lifetime transfers that utilized the gift tax applicable credit. For example, a donor who makes gift transfers of $1 million during his or her lifetime may make transfers of $2.5 million at death and not be exposed to federal estate tax. Total transfers in excess of $3.5 million will be subject to federal estate tax at a top rate of 45 percent.
- The IRA charitable rollover has been extended to the 2009 tax year. Individuals who have reached age 70½ may roll over an amount up to $100,000 from an IRA directly to a qualified charitable organization. The amount rolled over will be excluded from the individual's gross income for federal income tax purposes. Further, the amount rolled over will be applied against the amount that is required to be distributed from the individual's IRA (required minimum distribution) for the year. Since the amounts rolled over to charity will not be included in an individual's gross income, no charitable deduction will be allowed.