Gift Tax

Many taxpayers believe they can deduct gifts they give to others. That is not true! To prevent people from giving their assets away prior to their death and thereby avoid taxes on their estate, our tax system includes a gift tax, which is paid by the giver and must be reported on a gift tax return if the amount given to any one individual for the year exceeds the annual gift exemption ($12,000 for 2008). Gifts of larger amounts are taxable but each individual giver can offset the gift tax with a tax credit that offsets the first $1 million of lifetime taxable gifts. Caution - credit used to offset gift tax will not be available to offset estate taxes when the giver passes away. Head of Household – Is a special filing status for unmarried and, in certain special situations, married taxpayers who pay more than half the cost of maintaining a home for themselves and a qualifying person, for more than half the tax year. The special filing status affords qualifying taxpayers with a higher standard deduction and more beneficial tax brackets than are available to taxpayers who file using the single status.