They thought the tax break on $5 million in nontaxable gifts would end in 2012, but Congress extended it and made it bigger.
Want some evidence that the rich are concerned about taxes?
Consider the IRS report that shows that U.S. taxpayers claimed four times more nontaxable gifts on their 2012 tax returns –– $122 billion –– than they had in either of the previous two years. A big chunk of that is because wealthy people were rushing to beat the December 2012 deadline that Congress had set in December 2010 when it gave a tax break to those gifting up to $5 million, reports Bloomberg.
The total amount of nontaxable gifts is expected to be even higher when data is collected from tax returns filed in 2013.
Previously the limit for the tax break was $1 million. “The lifetime exclusion applies on top of an annual gift-tax exclusion, which is now $14,000,” Bloomberg says.
Bloomberg also notes that this tax break doesn’t benefit a whole lot of people: “Most of the money — $84 billion — came in the form of gifts exceeding $1 million, and those were made by fewer than 30,000 people, according to the IRS.”
Congress extended the tax break in January 2013 and tied it to inflation. This year, the amount is $5.34 million.
These likely aren’t gifts to charity but rather a transfer of assets to family members so the wealthy can reduce taxes on their estates. Explains CBS MoneyWatch, “The practical application of this is that individuals can make gifts during life or transfers at death of up to this new higher limit and pay no federal estate tax.”
It’s not the only way the wealth avoid paying taxes. This Bloomberg article describes another popular method called the Walton grantor retained annuity trust, or GRAT. Read it, and you’ll end up scratching your head.