In the recent race to the finish of the Minnesota Legislative session, a flurry of tax changes were introduced, with some getting less attention than others. One that passed under the radar of many is a new gift tax that will be imposed by Minnesota in a few short weeks. Here are the details.
- The gift tax goes into effect for gifts made after June 30, 2013
- Each Minnesotan is allowed to gift up to $1 million during their lifetime, tax free.
- After the first $1 million in gifts, a 10% tax rate is charged on any future gifts.
Further, any gifts made within 3 years of a taxpayer’s death will be “clawed back” and will be considered part of the decedent’s estate when calculating Minnesota estate tax. Minnesota exempts only the first $1 million of a decedent’s estate from tax, so pulling prior gifts back into the estate can create additional estate tax burden.
Due to all of this, careful planning is needed when considering making gifts of larger size, or of appreciated real estate, to be sure that all tax ramifications have been taken into account. As always, we’re here to help.