The IRS wants you to know that if you gave money or property to someone as a gift, you may owe federal gift tax. Many gifts are not subject to the gift tax, but the IRS offers the following eight tips about gifts and the gift tax.

1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2011 and 2012, the annual exclusion is $13,000.
2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
   • Gifts that are do not exceed the annual exclusion for the calendar year,
   • Tuition or medical expenses you pay directly to a medical or educational institution for someone,
   • Gifts to your spouse,
   • Gifts to a political organization for its use, and
   • Gifts to charities.
6. You and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion
7. You must file a gift tax return on Form 709, if any of the following apply:
   • You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
   • You and your spouse are splitting a gift.
   • You gave someone (other than your spouse) a gift of a future interest that he
   or she cannot actually possess, enjoy, or receive income from until some time in the future.
   • You gave your spouse an interest in property that will terminate due to a future event.
8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.

For more information contact Steve Siesser at ssiesser@verizon.net

Location, as they say, is everything. In retirement, that’s especially true according to SunTrust. In a recent article, SunTrust ponted out that you might be looking for a place with favorable weather, a bevy of amenities and low cost-of-living that allows you to stretch your fixed-income dollars until they squeak. But how much you pay for a house or a loaf of bread in Boston, Massachusetts, vs. Boone, North Carolina, is only one factor in the total cost-of-living equation. Another is taxes, which vary wildly from one place to the next. Alaska’s typical tax burden is 6.3 percent, according to the nonpartisan Tax Foundation, and almost twice as much in New Jersey (12.2 percent). Types of taxes vary from state to state, but here are a few of the big ones to consider:

Personal income tax. Nine states don’t have a state income tax: Alaska, Washington, Nevada, Wyoming, South Dakota, Texas, Tennessee, Florida and New Hampshire. But New Hampshire and Tennessee tax dividends and interest, an important source of income for many retirees. On the other hand, 12 states, even though they may have a personal income tax, leave Social Security and pensions untaxed.

Property tax. For retired homeowners, property taxes are probably their biggest tax burdens and these have no relation to income or ability to pay. Louisiana’s mean property tax ran $243 in fiscal year 2009. But in New Jersey the mean was $6,579. New Hampshire has no income or state sales tax, but property taxes can run high. The good news is that some locales have tax abatement, deferment or tax-freeze programs for seniors.

Sales tax. Oregon, New Hampshire, Alaska, Montana and Delaware don’t have a retail sales tax. However, cities and counties within these states sometimes make up for this through sales taxes of their own. Other times, a town in a state that already has a sales tax may have one too, giving you a double tax whammy. In Tuba City, Arizona, for example, the sales tax is 13.725 percent, combining state, county and tribal sales tax.

Gasoline excise tax. Again, there’s a wide range of how much states tack on to the already climbing price of gas, from 8 cents per gallon in Alaska to 46.5 cents in California.

Bottom line. If your goal is to trim expenses in retirement, then moving to (or staying in) a state with a combination of low cost-of-living and low taxes is one way to do it. Not every type of tax is applicable to every retiree. The concerns for someone who lives mainly on Social Security and rents an apartment are different from a person who gets dividends and owns several homes. And for some, proximity to friends and family far outweighs these financial considerations.  If you have questions concerning the impact of taxes on retirement, contact Steve Siesser at ssiesser@verizon.net