MANKATO, Minn. (10/22/2013) - As a result of the 2013 Minnesota legislative session, Minnesota now has a state gift tax effective July 1, 2013. The rules follow many of the federal gift tax rules with a few differences. The gift tax also has implications regarding the state estate laws and tax.
The Minnesota gift tax allows for an annual gift exclusion of $14,000 per person per individual per year to any number of persons without any tax. Couples can combine their gifts for a total of $28,000 per recipient if the spouses own the asset together, write separate checks for $14,000 each or file an IRS 709 and Minnesota gift tax form. In addition, each individual is allowed a lifetime gift exclusion of $1,000,000 which represents a lifetime gift tax credit of $100,000. Couples can combine their lifetime exclusions as well. Gifts in excess of the annual exclusion amounts will require the donor to file an IRS 709 and Minnesota gift tax form. Gifts in excess of the lifetime exclusion amount will also have to file the gift tax forms and the gift will be taxed at a flat rate of 10 percent.
The value of gifts exceeding the annual exclusion amount made within 3 years of a decedent's death will be added back into the decedent's adjusted taxable estate to determine if Minnesota estate tax is due. This provision is retroactive applying to estates of decedents dying after Dec. 31, 2012. The good news here is the amount of estate tax due is reduced by the amount of gift tax paid on any gift added back into the decedent's adjusted taxable estate.
The Minnesota gift tax only applies to the transfer of property located in Minnesota. It applies to Minnesota residents but also to gifts of real estate and tangible personal property located in Minnesota but owned by any non-resident. Minnesota residents who gift real or tangible personal property located outside the state are not subject to the Minnesota gift tax.
Any gift tax due is the responsibility of the donor. However, if the gift tax is not paid when due, that recipient of the gift is responsible to pay the tax. The tax is due by April 15 after the close of the calendar year in which the gift was made. There are some exceptions if the donor dies.
The Minnesota lifetime gift tax exclusion amount of $1,000,000 per person is in addition to the Minnesota estate tax exclusion of $1,000,000. Keep in mind there is also a Minnesota Qualified Small Business Property and Qualified Farm Property Exclusion for estates that qualify. It is important to check with your accountant and attorney for information about these issues specific to your situation. Professional assistance is crucial to effective gift and estate planning.