While creating a will is essential, gifting assets before death can offer considerable advantages. It’s crucial to understand the tax implications involved when providing financial support to loved ones, particularly gift taxes, whcih many overlook and can result in unforeseen challenges. This underscores the importance of seeking guidance from a knowledgeable Des Moines Estate Planning Lawyer to explore your options and potential strategies for managing these complex taxes. Continue reading for a detailed explanation of how gift taxes work in Iowa.
What is a Gift Tax?
Gift taxes are essentially a tax on money or property that is given from one party to another while receiving less than the full value of the asset. When planning to gift assets, it’s essential to understand the relevant gift tax rules in Iowa. As of 2025, there is no state-level gift tax. This means you won’t owe a separate tax to the state for making gifts. However, there are federal gift taxes that are designed to prevent individuals from avoiding the federal estate tax by relinquishing their assets during their lifetime.
Generally, you can gift up to $19,000 per person without incurring any gift tax or having to report it to the Internal Revenue Service (IRS). These annual gifts contribute to your total lifetime gift tax exemption. For married couples, this annual exclusion is doubled to $38,000. There is also a lifetime exemption of $13.99 million per person for both gifts made during your lifetime and transfers at death. You don’t usually do not have to pay a gift tax until your overall lifetime gifts surpass this $13.99 million exemption. For married couples, they can potentially safeguard up to $27.98 million from federal and gift taxes.
Is It Possible to Avoid Gift Taxes in Iowa?
Federal gift tax laws can be complex. While remaining within the annual exclusion is the easiest way to avoid the tax, various strategies can be employed, like direct payments are available for larger gifts. Those expecting to exceed the annual limit may consider establishing a trust fund. Securing assets in a trust will remove them from your estate, potentially enabling you to avoid gift taxes on the transfer.
As you can see, it’s vital to take both the annual and lifetime gift tax exemptions into account when making plans to gift your hard-earned assets. Due to the complexities of gifting assets in Iowa, seeking advice from a qualified estate planning attorney is imperative. Navigating these regulations can be challenging, making professional guidance invaluable. At Herting Law, PLLC, we are prepared to help you determine the best approach. Connect with our firm today to arrange a consultation and discuss your objectives.
