If you live in Maryland and are thinking of giving a gift to someone, you’ll want to be aware of Maryland gift tax law. It’s also important for gift recipients and potential recipients to be aware of the applicable law in order to ensure that they fully comply with state tax regulations.
TL;DR (Too Long; Didn't Read)
The state of Maryland currently does not impose a gift tax law. However, this does not mean that individuals giving and receiving gifts do not have to comply with federal gift tax regulations.
What Is the Status of Maryland Gift Tax Law?
Maryland doesn’t have a state gift tax law. However, state residents who decide to give gifts must observe all the provisions of the federal gift tax laws.
A gift is a type of transfer of ownership of property from one person to another. When a property is gifted to another person, it is transferred without payment or without a payment that equals the gift's true worth.
Exemptions to Maryland Gift Tax Law
Generally speaking, gifts are taxable. There are some exceptions that make gifts in some categories exempt from being taxed.
- Gifts with a value under the annual exclusion limit each calendar year.
- Gifts transferred to a spouse.
- Tuition or medical expenses paid for another person. These are educational and medical exclusions.
- Gifts made to a political organization.
The gift exemption amount was $14,000 in 2017. It increased to $15,000 in 2018. For married couples, the gift exemption is double this amount. You can give up the exclusion amount to anyone you want, and no gift tax is due from either party.
For gifts with a value above the gift exemption amount, the person making the gift is usually responsible for any federal gift tax in Maryland. An arrangement may be made where the person receiving the gift may pay the tax. Before agreeing to pay the gift tax when receiving a gift, consult with a tax professional.
Medical Expenses as Gifts
There are specific rules about medical expenses you need to be aware of if you want to qualify for the exclusion.
Payments for medical expenses for someone must be made to the doctor, hospital or clinic that provided the service. Do not give the gift directly to the person who received the medical care.
The medical payments must be made for a qualifying medical expense. Check with the IRS before making a payment as a gift for someone else. Some examples of qualifying medical expenses are those incurred for transportation for medical appointments, diagnosing and treating disease. Medical expenses for medical procedures that affect either the body’s structure or functioning also qualify, along with medical insurance, which includes long-term care coverage.
Gifting a Vehicle to a Family Member in Maryland
When a vehicle is transferred from one family member to another family member as a gift, the new owner isn’t required to pay excise tax. The rules about gifting a vehicle apply to cars registered in Maryland, as well as ones that were registered in Maryland at one time by a family member. The list of allowable family relationships for transferring vehicles includes the following:
- Mother and Father
- Stepmother and Stepfather
- Mother-in-law and Father-in-law
- Grandmother and Grandfather
- Son and Daughter
- Son-in-law and Daughter-in-law
- Stepson and Stepdaughter
- Sister and Brother
- Half Brother and Half Sister
- Aunt and Uncle
In order to qualify as a gift in Maryland, a vehicle must be given to a family member without any money or other valuable property given in exchange. The recipient of the car can’t offer to provide any type of services to the donor as payment.
How To Get Title for a Gift Vehicle in Maryland
If you receive a vehicle as a gift, you'll have to apply for title and registration. Visit a Motor Vehicle Administration branch office in person. Even though you aren’t required to pay the excise tax, you will need to pay a title fee and a registration fee. Make sure you have the existing title document and proof of the family relationship with you if you and your family member have different last names. Copies of birth, marriage, adoption and divorce certificates may be required for this purpose.
The application for Maryland Gift Certification form lists the family relationships accepted under Maryland state laws.
If the car is being transferred by an aunt or uncle, age 65 or older, to a niece or nephew, a gift title transfer certified statement must be included. If the aunt or uncle is younger than 65 years of age, the car cannot be considered a gift, and excise tax is charged.
Giving Securities as Gifts
If you would like to give securities as a gift, you need to ensure that you follow the IRS rules correctly. You purchase the securities in the names of the person giving the gift and the recipient. You can also open a brokerage account with joint ownership. Once the account is open, your purchase of stocks, bonds and mutual funds can be counted as a gift.
Gifting Rules for 2018
You can make as many cash gifts of up to $15,000 in 2018 as you wish without having to pay a gift tax.
Under IRS rules, you can’t simply make an existing bank account a joint one with a family member and have the funds in the account qualify as a gift. The money in the account won’t be recognized in this way until your family member withdraws the funds.
The IRS does recognize that a gift made by only one spouse is made by both of them, as long as both spouses give their consent. It’s not necessary for a married couple to show that each spouse transferred funds to the recipient separately or that each one wrote a separate check for the gift.
A home, vacant land or a vacation property can be gifted to a loved one. The amount of the annual exemption ($15,000 for an individual and $30,000 for a married couple for 2018) is applied to the fair market value of the property, less any outstanding mortgage. The balance of the value of the property is taxed.
Keep in mind that unless your loved one plans to live in a house you have transferred to him as his primary residence for a minimum of a couple of years before selling it, the sale will trigger capital gains tax. Selling a vacation property or land will also trigger capital gains tax.
Cash Gift Rule for 2017
For 2017, you could give up to $14,000 in cash gifts without having to pay a gift tax. This is the same amount that applied for the years 2014, 2015 and 2016.
Before you make a decision about gifting real estate to a loved one, consult with an experienced tax consultant who can explain exactly how gifting real estate during your lifetime, as opposed to leaving it to a beneficiary as part of your estate, affects capital gains and any other taxes payable. Then you can make the choice that benefits you and your loved ones most.
- Law Offices of Cathy Mack: Is There a Gift Tax in Maryland?
- IRS.gov FAQs on Gift Taxes
- MVA Maryland: Titling: Gift to Family Member
- MVA Maryland: Application for Maryland Gift Certification
- Nolo.com: Reduce Estate Taxes by Gifts
- Cornell Law School: US Tax Code 2513 Gift by Husband or Wife to Third Party
- Turbotax: The Gift Tax
- SmartAsset.com: Capital Gains Tax Calculator
- Thinkstock/Comstock/Getty Images