Anaya Nolan
Arizona does not have its own gift tax, but gifts of real property are subject to federal gift tax. The donor is responsible for paying this tax, but if they don't, the recipient will be held liable. While there is no inheritance tax in Arizona, beneficiaries may be required to pay taxes on their inheritance, and the types of assets inherited can affect tax liability.
| Characteristics | Values |
|---|---|
| Inheritance tax in Arizona | No inheritance tax in Arizona since 2006 |
| Gift tax in Arizona | No state gift tax in Arizona |
| Gift tax exemption | Gifts less than $14,000 per year are tax-free |
| Gift tax rate | 40% |
| Gift tax exemption portability | Yes |
| Gift tax exemption for married couples | $10 million |
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What You'll Learn
Arizona does not levy a state gift tax
In 2006, Governor Napolitano signed a bill to permanently remove all inheritance, gift, and estate tax requirements from Arizona state laws. However, Arizona residents may still have to pay federal gift tax, and their estates may be subject to other taxes.
The federal government imposes its own tax on estates in the United States worth more than $5.49 million as of 2017. This exemption rate is subject to change due to inflation. The current federal estate tax is around 40%.
In 2013, individuals could make gifts of up to $14,000 per person without any federal gift tax consequences and without having to file a Gift Tax Return. This annual exclusion was also available for gifts to pay medical and educational expenses.
Arizona state law also prohibits state officers and employees from accepting gifts with a total value of more than $10 in any calendar year.
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Gifts of real property are subject to federal gift tax
In the United States, gift taxes are a federal matter. The federal gift tax applies to the transfer of any type of property, including real property. However, there are certain exclusions and exemptions that may apply. For example, gifts to a spouse are generally not taxable. Additionally, individuals can make gifts of up to a certain amount each year without incurring federal gift tax consequences. This annual exclusion amount is adjusted annually for inflation and was $14,000 for 2013.
It is important to note that the gift tax applies regardless of whether the donor intends the transfer as a gift. If an individual gives property or the use of property without expecting to receive something of at least equal value in return, it may be considered a gift for tax purposes. For example, selling something at less than its full value or making an interest-free loan may be considered a gift.
In Arizona, there is no state inheritance, gift, or estate tax. However, Arizona residents may still be subject to federal gift taxes and other taxes on their gifts or inheritances. The federal gift tax rules and rates have changed several times in recent years, and individuals should consult the most current laws and regulations to understand their potential tax liability.
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Gift tax exemption levels
Arizona does not have a gift tax. However, the federal government charges a gift tax on the transfer of money or property to another person. The federal gift tax exemption is $19,000 per person for 2025 and $18,000 per person for 2024.
Gifts exceeding the annual limit won't automatically prompt a gift tax. The difference is taken from the person's lifetime exemption limit, and no taxes are owed. For example, if you gave your brother $50,000 in 2025, you used up your $19,000 annual exclusion. You'll need to file a gift tax return in 2026, but you probably won't pay a gift tax. The extra $31,000 will simply count against your lifetime exclusion.
The lifetime gift tax exemption is $13.99 million in 2025, up from $13.61 million in 2024. The limit for married couples filing jointly is $27.98 million for 2025. However, in 2026, the exclusion amount will revert to its pre-2018 level of about $5 million (as adjusted for inflation) per individual.
In 2024, individuals could give up to $18,000 per person, tax-free. For married couples, a gift of $36,000 could be made to any number of people, tax-free. The lifetime estate and gift tax exemption was $13.61 million in 2024.
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Annual gift tax exclusion
Arizona does not have an inheritance tax, although Arizona residents may be subject to other taxes on their inheritance. In 2006, Governor Napolitano signed a bill to permanently remove all inheritance, gift, and estate tax requirements from Arizona state laws.
The annual gift tax exclusion is a set dollar amount that an individual may gift to another person without reporting it to the IRS. The annual exclusion is per recipient, not the sum total of all gifts. For 2025, the annual gift tax exclusion is $19,000 per person. This means that married couples have a total gift tax limit of $38,000. This is the maximum that can be given to a single person without reporting it to the IRS. In 2024, the limit was $18,000 ($36,000 for married couples).
The annual exclusion applies to gifts to each donee. Gifts that are not more than the annual exclusion for the calendar year are not taxable gifts. Tuition or medical expenses paid for someone, gifts to a spouse, and gifts to a political organization for its use are also not taxable gifts.
Gifts exceeding the annual exclusion amount do not automatically incur a gift tax. Instead, the amount that exceeds the annual limit is subtracted from the individual's larger lifetime gift tax exclusion. The lifetime gift tax exemption is $13.99 million in 2025, up from $13.61 million in 2024. The limit for married couples filing jointly is $27.98 million for 2025.
In 2026, the exclusion amount will revert to its pre-2018 level of about $5 million (adjusted for inflation) per individual.
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State and federal tax rules
Arizona does not levy a state gift tax, and there is no inheritance tax in the state. However, gifts of real property are subject to the federal gift tax. The person giving the gift is responsible for paying the federal gift tax. If the donor does not pay the gift tax, the recipient will be held liable. The recipient is not required to declare the gift amount as income, but they must pay the requisite state and federal income tax if the property accrues income after the transaction.
The federal gift tax applies to the transfer of property by one individual to another without receiving anything, or less than full value, in return. This includes money, the use of property, or income from property. The tax applies whether or not the donor intends the transfer to be a gift. Individuals can give up to $14,000 per person per year without any federal gift tax consequences and without filing a Gift Tax Return. This annual exclusion is also available for gifts to pay medical and educational expenses.
In terms of estate taxes, while Arizona does not have its own estate tax, the federal government imposes its own tax on estates worth more than the exemption rate, which was $5.49 million as of 2017 and is subject to change due to inflation. The current federal estate tax rate is around 40%. For married couples, the exemption amount is almost $11 million, and all property left to a surviving spouse is free of federal estate taxes.
It is important to note that the tax laws and regulations can be complex and subject to change. For specific advice regarding state and federal tax rules, it is recommended to consult a tax specialist or an estate planning attorney.
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Frequently asked questions
No, Arizona does not levy a state gift tax. However, gifts of real property are subject to the federal gift tax.
The donor is responsible for paying the federal gift tax. If the donor does not pay, the donee will be held liable.
The gift tax is a federal tax on the transfer of property from one individual to another without receiving something of equal value in return.
