Maryland Gift Tax Law

by Andrew Latham
Money given within two years of a donor's death can be considered a taxable gift, but spouses are immune.

Money given within two years of a donor's death can be considered a taxable gift, but spouses are immune.

As a general rule, Maryland doesn't impose taxes on gifts. In fact, as of 2012, the only state that had a dedicated gift tax was Connecticut--with a top rate of 12 percent. However, in certain circumstances, Maryland does impose a gift tax to prevent taxpayers from using gifts as a scheme to avoid paying other taxes.

Deathbed Gifts

Maryland charges taxes on gifts as a special case of its inheritance tax law. This special case includes gifts you made within two years of your death. Once you die, gifts made within this two-year period are considered a material part of your estate and, as such, taxable under Maryland's inheritance tax. As of 2012, Maryland's inheritance tax was set at 10 percent of the property's clear value--its fair market value with certain expenses deducted.

Inheritance Tax

Gifts made by your estate as part of your will and testament are also taxed in Maryland. In this case the receiver of the gift must pay the tax. However, there are many exceptions to Maryland's inheritance tax. For instance, close relatives and charities don't have to worry about paying it. In the case of small estates--those with an overall value of less than $30,000--no inheritance tax is due. Recipients of gifts with a value of less than $1,000, or of money the deceased person received as compensation for losses from the Holocaust, don't have to pay taxes, either.

Excise Taxes on a Vehicle

As of 2012, when a vehicle is titled in Maryland, the new owner must pay a 6 percent excise tax on the vehicle's value, regardless of whether the vehicle is a gift. The only exception is for vehicles which are gifted by a close family member, such as a parent, a sibling, a child, an adopted child, a grandparent, a daughter-in-law or a son-in-law. However, if the vehicle is gifted by anyone else, such as a friend or a cousin, the new owner must pay excise tax.

Federal Tax

The maxim, there is no such thing as a free lunch, is certainly true when it comes to gifts. In Maryland, you could have to pay taxes twice on the same gift. This is because federal gift tax applies wherever you live and independently of your state's tax law. The good news is that most of us will never have to pay it. As of 2012, the IRS grants a lifetime exemption of $5.25 million and a yearly exclusion of $14,000. This means you could give away up to $5.25 million throughout your lifetime, or $14,000 a year to any number of recipients, without paying a cent in gift taxes.

About the Author

Andrew Latham has worked as a professional copywriter since 2005 and is the owner of LanguageVox, a Spanish and English language services provider. His work has been published in "Property News" and on the San Francisco Chronicle's website, SFGate. Latham holds a Bachelor of Science in English and a diploma in linguistics from Open University.

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