You Asked – Will I owe a gift tax?

Article | January 08, 2025

When taxpayers give anyone property valued at more than $19,000 in any one year, they should file a gift tax form. Under current law, you can gift $13.99 million over your lifetime without incurring a gift tax liability, but you should file the Gift Tax return to take advantage of the exemption. Oregon does not currently have a gift tax. However, even if you file the proper return and avoid any gift tax, you still may be passing on a significant tax situation to the next generation. The reason is that when you give away your property, the tax basis (or the original cost) of the property for the giver becomes the tax basis for the recipient. For example, suppose you bought the house years ago for $150,000 and it is now worth $350,0002. If you give your house to your children, the tax basis will ‘remain’ $150,000. If the children sell the house, they may have to pay capital gains taxes on the difference between $150,000 and the selling price. Of course, your children may avoid the tax if they live in the house for at least two years before selling it. In that case, they can exclude up to $250,000 ($500,000 for a couple) of their capital gains from taxes. Also, inherited property does not face the same taxes as gifted property. If the children were to inherit the property, the property’s tax basis would be “stepped up,” which means the basis would be the current value of the property. However, the home will remain in your estate, which may have estate tax consequences. Because every situation is unique, please be sure to discuss with your CPA to develop a strategic estate plan to minimize the tax consequences of transitioning wealth to your beneficiaries.

Joseph Lewis CPA, JD

1/06/2025