North Carolina
Repeals the NC Gift Tax (August 1, 2008)
On July 17, 2008, Governor Mike
Easley signed into law House Bill 2436. Among the 200 plus pages of
budget items was a major victory for estate planners and their
clients; the total repeal of the North Carolina gift tax. The
repeal will take effect on January 1, 2009 and will apply to all
gifts made on that date and thereafter.
Prior to the recent repeal, North
Carolina was one of only a handful of states that still had a gift
tax. Under the old system, and for the remainder of 2008, North
Carolina imposes a gift tax on any gift above the federal annual
exclusion ($12,000 in 2008) except in the case of gifts to certain
family members of the donor (e.g., children, grandchildren), where
an additional $100,000 lifetime exclusion for N.C. gift tax purposes
is allowed. Thus, a donor could only make gifts of up to
$100,000.00 plus any applicable annual exclusion to his or her
descendants during the course of the donor’s entire life without
incurring the North Carolina gift tax.
Starting in 2009, the Federal
gift tax laws will now exclusively determine whether North Carolina
taxpayers are subject to any gift tax. The federal lifetime gift
tax exclusion is currently one million dollars ($1,000,000.00).
Thus, a North Carolina taxpayer will soon be able to make up to a
million dollars of gifts plus applicable annual exclusion gifts
during one’s lifetime without incurring gift tax at the Federal or
state level.
In short, the repeal makes the
tax consequences of estate and gift planning significantly less
expensive for North Carolinians. Further, with a January 1, 2009
effective date, we suggest that clients not make any gifts in excess
of any currently available annual or lifetime exclusions for the
remainder of 2008.
If you
have any questions regarding this alert or other Estate Planning
questions, please contact
Bill Pate at 910.692.6866 or
wpate@poynerspruill.com.
Circular 230
Disclosure
To ensure compliance with requirements imposed by the IRS, unless
specifically indicated otherwise, any tax advice contained in this
communication (including any attachments) was not intended or
written to be used, and cannot be used, for the purpose of avoiding
tax related penalties or promoting, marketing or recommending to
another party any tax related matter addressed herein.
