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The federal gift tax is often considered one of the most complicated and confusing taxes out there. When it is not properly heeded, gift givers can find themselves subject to this tax.
There are four secrets, however, that can help givers skirt the need to claim or pay this tax. When a few tricks of the tax trade are followed, it is possible to avoid this tax on an annual basis and even over the course of a lifetime.
Since the gift tax can impact financial gifts and also gifts of property, learning how to avoid having to pay this can be important. Remember, it is the giver that gets taxed. These gift tax secrets can help people maximize exclusions and increase their returns.
1. Heed Annual Limits to Avoid Taxation
The first, and maybe the most important, of the gift tax secrets involves understanding and heeding the set limits on annual gifts. Individuals are allowed to give up to $13,000 a year per gift recipient under exclusionary rules. They can give up to $1 million in gifts that exceed the limits over the course of a lifetime, as well. Gifts can be given to family, friends and even acquaintances and count.
2. Couples can Double Their Efforts
It is possible for married couples to give in amounts over $13,000 if they both agree to the gift. The law enables couples to double their giving power if they choose to. This means if a child needs $20,000 for a down payment on a home, the father can give $13,000 and the mother $7,000 and neither would be subject to the tax. The gift also will not count as income for the child and does not have to be claimed on income taxes.
3. Give Gifts That are Exempt
There are certain "gifts" that are considered exempt from tax laws. These can increase an individual's ability to give cash without jeopardizing tax-free status. Gifts included on the exempt list are:
Charitable gifts are not subject to gift taxes no matter their amount. Giving these can reduce the overall value of an estate for eventual estate tax purposes. The act of giving to charity can also reduce present year income tax liability.
Getting taxed on money that is given to others might seem crazy, but it is law. To avoid the gift tax, it can pay to follow the annual giving limits and use other secrets to minimize liability.
There are four secrets, however, that can help givers skirt the need to claim or pay this tax. When a few tricks of the tax trade are followed, it is possible to avoid this tax on an annual basis and even over the course of a lifetime.
Since the gift tax can impact financial gifts and also gifts of property, learning how to avoid having to pay this can be important. Remember, it is the giver that gets taxed. These gift tax secrets can help people maximize exclusions and increase their returns.
1. Heed Annual Limits to Avoid Taxation
The first, and maybe the most important, of the gift tax secrets involves understanding and heeding the set limits on annual gifts. Individuals are allowed to give up to $13,000 a year per gift recipient under exclusionary rules. They can give up to $1 million in gifts that exceed the limits over the course of a lifetime, as well. Gifts can be given to family, friends and even acquaintances and count.
2. Couples can Double Their Efforts
It is possible for married couples to give in amounts over $13,000 if they both agree to the gift. The law enables couples to double their giving power if they choose to. This means if a child needs $20,000 for a down payment on a home, the father can give $13,000 and the mother $7,000 and neither would be subject to the tax. The gift also will not count as income for the child and does not have to be claimed on income taxes.
3. Give Gifts That are Exempt
There are certain "gifts" that are considered exempt from tax laws. These can increase an individual's ability to give cash without jeopardizing tax-free status. Gifts included on the exempt list are:
- those to a spouse
- gifts that pay for medical expenses, but these must be paid directly to the provider
- gifts that help fund tuition or educational expenses
Charitable gifts are not subject to gift taxes no matter their amount. Giving these can reduce the overall value of an estate for eventual estate tax purposes. The act of giving to charity can also reduce present year income tax liability.
Getting taxed on money that is given to others might seem crazy, but it is law. To avoid the gift tax, it can pay to follow the annual giving limits and use other secrets to minimize liability.
