If the thought of blessing others with your processions and money while you’re still alive thrills you, Texas tax laws may work in your favor. If you wait until your death, your estate may have to pay up to 55% in government taxes, significantly reducing the amounts of the monetary gifts that you can leave to your loved ones.
Annual gift exclusion
According to the 2023 tax codes, you can give away up to $17,000 annually without anyone paying taxes on the gift. Therefore, consider this option when doing estate planning.
If the amount is over $17,000, then taxes may still not have to be paid on the gift. Each person is allowed to give away $12.92 million in their lifetime. Consider this example. your granddaughter is into showing horses, and you buy her a horse worth $20,000 to show. Assuming that you have not given anyone anything before, the first $17,000 of the horse comes off her annual limit. Still, no one owes taxes because the remaining $3,000 comes off her $12.92 million lifetime giving limit.
What happens if someone exceeds the lifetime limit?
If you exceed the lifetime limit, you will pay a gift tax based on the amount you exceed. The percentage rates vary from 15% to 40% based on how far over the limit you go.
Bless someone with a gift they want without fear of paying taxes on it during your lifetime if you stay under the lifetime gift tax limit of $12.92 million, but if your wait until your death, then your estate may pay a higher rate.