Many individuals of Sarasota Inherit assets or money, which undoubtedly is a financial advantage. However, not knowing the implications of taxes levied on estates and gifts can lead you to trouble. However, you can avoid such trouble by hiring a CPA in Sarasota, Florida, to help you with estate and gift tax.

Although Florida does not have a state tax, you might still have to pay the federal estate tax. Similarly, the state does not have a gift tax, but the federal estate tax may be applicable in the state.

Provisions of estate and gift taxes

The IRS imposes a gift tax on the property you receive without giving away anything of substantial value. The gift, in such cases, be 

  • Real estate
  • Cash
  • Other forms of properties. 

The IRS has limited how much you can transfer to someone as a gift.

On the other hand, the IRS requires estates of a specific value with prior taxable gifts and combined gross assets to file estate tax returns. The estate tax becomes applicable in the case of the decedent. The property in estate tax can be:

  • Real estate
  • Securities
  • Trusts
  • Insurance
  • Annuities
  • Other assets

Estate and gift taxes share a common motive. 

Estate and gift taxes are similar and, therefore, share similar motives, which are:

  • These taxes are aimed at generating revenue for the government, which is later used across different public programs.
  • Estate and gift taxes promote fair distribution of wealth among the beneficiaries.
  • Estate and gift taxes help prevent tax avoidance when transferring assets to beneficiaries.
  • Estate and gift taxes encourage thoughtful estate planning, allowing you to reduce tax liabilities. 

Key differences between estate and gift taxes

Despite sharing common motives, there are several differences between estate and gift taxes. Some of the most prominent ones are listed hereunder:

  • The estate tax is levied on the estate transfer after the donor dies. However, gift tax becomes applicable at the time of transfer of a property during the donor’s lifetime.
  • Estate tax makes the estate responsible for paying taxes, dues, debts, etc., whereas the donor usually pays for the taxes or duties applicable to the gift.
  • One can reduce estate taxes through strategic lifetime gifting to reduce the size of taxable estate. On the other hand, one has to capitalize on the annual tax exclusion limit to save taxes on gifts.

Final thoughts

Estate and gift taxes are intended to ensure the fair distribution of wealth among the beneficiaries. However, with sufficient knowledge, you can find loopholes in estate and gift taxes and save big time. You can also hire a professional CPA to help you save estate and gift taxes.