In the waning hours of the 2013 legislative session, the state legislature passed a new state gift tax as part of the Omnibus Tax Bill. Governor Dayton is expected to sign the bill into law. When he does, Minnesota will become only the second state to have a state gift tax. This new tax will have a significant impact on Minnesota families and small-business owners.
The new gift tax will impose a 10% tax on gifts in excess of a $1 million dollar lifetime total. That means any gifts over and above $1 million total over your lifetime will be subject to the new tax. In other words, Minnesota families looking to gift assets to their children and grandchildren in excess of $1 million are now subject to a brand new gift tax in Minnesota.
One additional note is that the new gift tax applies not only to Minnesota residents, but also to non-residents who own property in Minnesota; which may significantly impact small business owners and others who have established residency in other states due to a retirement, taxes or both, that would like to leave those assets to their children, grandchildren or the next generation of their business.
This is a step in the wrong direction for the state and may cause human capital and investment capital to seek residency in other states that are more welcoming. For more information on the new gift tax, click here.
If you have questions on how to minimize your Minnesota estate and gift taxes, call us today at 763-420-5087.
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