Transfer Tax
A tax imposed on the transfer of property or assets from one person or entity to another.
What is Transfer Tax?
A transfer tax is a government levy on the conveyance of assets from one party to another. In the U.S. federal context, three interconnected transfer taxes form the unified transfer tax system: the gift tax (on lifetime gifts above the annual exclusion), the estate tax (on assets transferred at death above the exemption), and the generation-skipping transfer tax (GSTT, on transfers that skip a generation). For 2024, the unified lifetime exemption is $13.61 million per individual. Many states also impose their own estate or inheritance taxes with lower exemption thresholds. Real estate transfer taxes, charged at closing, are separate state/local taxes.
Example
A parent gifts $500,000 in stock to their adult child in 2024. After the $18,000 annual gift tax exclusion, the $482,000 taxable gift reduces the parent's lifetime unified exemption from $13.61 million to $13.128 million. No gift tax is due now; but the reduced exemption means less of the estate will be sheltered from estate tax at death.