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The federal gift tax is a charge in place that actually taxes givers when their gifts exceed certain set annual limits. Avoiding this tax is possible, but it takes careful accounting when large gifts are planned.
The Whys Behind the Gift Tax
The gift tax was designed to be charged to the giver when gifts exceed certain annual limits. The idea behind it is to prevent people from avoiding all estate tax liability when they die.
Understanding Gift Tax Limits
Although the federal gift tax can be burdensome, there are limits to pay attention to that can help givers avoid payment. It is acceptable for an individual to give up to $13,000 per recipient in a single calendar year. Couples can combine their exceptions to enable them to give more to recipients. This means it is possible for parents to give larger annual gifts to each of their children and even their friends if they desire.
Exemptions to the Law
It is not necessary to pay the gift tax when gifts fall under the set limits. Taxes also do not come into play if gifts are meant for:
The Whys Behind the Gift Tax
The gift tax was designed to be charged to the giver when gifts exceed certain annual limits. The idea behind it is to prevent people from avoiding all estate tax liability when they die.
Understanding Gift Tax Limits
Although the federal gift tax can be burdensome, there are limits to pay attention to that can help givers avoid payment. It is acceptable for an individual to give up to $13,000 per recipient in a single calendar year. Couples can combine their exceptions to enable them to give more to recipients. This means it is possible for parents to give larger annual gifts to each of their children and even their friends if they desire.
Exemptions to the Law
It is not necessary to pay the gift tax when gifts fall under the set limits. Taxes also do not come into play if gifts are meant for:
- charitable purposes
- medical expenses, including insurance
- tuition and other educational-related expenses
