Gift Tax for Amounts Exceeding Lifetime Exclusion

When a gift amount exceeds the lifetime exclusion limit, the gift tax is applicable. The specific tax rate is based on a progressive tax rate, with a maximum of 40%. Below is an example to illustrate this.

Lifetime Exclusion and Gift Tax Rates

2024 Lifetime Exclusion Amount: $12.92 million Gift Tax Rate: Progressive rates, up to a maximum of 40%

Example Explanation

Assume the donor has already used up the $12.92 million lifetime exclusion and now wishes to gift $1 million to someone. Here is the detailed calculation process:

1. Determine Taxable Gift Amount:
2. Calculate Gift Tax:

Detailed Tax Rate Table

For precision, here is a part of the progressive gift tax rate schedule (2024) (note that actual rates may be adjusted):

• Up to $10,000: 18%
• $10,000 to $20,000: 20%
• $20,000 to $40,000: 22%
• $40,000 to $60,000: 24%
• $60,000 to $80,000: 26%
• $80,000 to $100,000: 28%
• $100,000 to $150,000: 30%
• $150,000 to $250,000: 32%
• $250,000 to $500,000: 34%
• $500,000 to $750,000: 37%
• Over $750,000: 40%

Specific Calculation

Assume the donor has already used up the $12.92 million lifetime exclusion and now wishes to gift $1 million. We will use the progressive rates for a detailed calculation.

1. First Portion $10,000:
2. Second Portion $10,000 (over $10,000 to $20,000):
3. Third Portion $20,000 (over $20,000 to $40,000):
4. Fourth Portion $20,000 (over $40,000 to $60,000):
5. Fifth Portion $20,000 (over $60,000 to $80,000):
6. Sixth Portion $20,000 (over $80,000 to $100,000):
7. Seventh Portion $50,000 (over $100,000 to $150,000):
8. Eighth Portion $100,000 (over $150,000 to $250,000):
9. Ninth Portion $250,000 (over $250,000 to $500,000):
10. Tenth Portion $250,000 (over $500,000 to $750,000):
11. Remaining Portion $250,000 (over $750,000):

Total Tax Amount

Adding the tax amounts from all portions:

$1,800 + $2,000 + $4,400 + $4,800 + $5,200 + $5,600 + $15,000 + $32,000 + $85,000 + $92,500 + $100,000 = $348,300

Therefore, the donor needs to pay $348,300 in gift tax.