Given that we are in the midst of the holiday season, here are a few reminders about gifts:
- You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell property for less than its full value or if you make an interest-free loan or a loan at a very low interest rate, you may be making a gift.
- Under current law, you can give up to $14,000 in cash or in property valued up to $14,000 to any one person without triggering any federal gift tax obligations.
- Married couples can give up to $28,000 (i.e., $14,000 each) to any one person without triggering any federal gift tax obligations. For example, a married couple could give up to $28,000 to their son or daughter without triggering any federal gift tax ramifications.
- $14,000 is not the total amount you can give B it=s the total amount you can give to any one recipient in a tax year without triggering any federal gift tax. You can give up to $14,000 to as many people as you choose this year without incurring any federal gift tax obligations. For example, if you have eight nieces and nephews, you could give each of them $14,000 ($112,000 total) without incurring any gift tax on those gifts.
- Gifts between spouses are not subject to the $14,000 exemption amount; they can be in for more than that amount and still be tax-free.
- If you do make a gift of more than $14,000 to any one person in a tax year, you will need to file a gift tax return. As the donor of the gift, you will likely be responsible for paying any gift tax that is owed.
- If you are fortunate enough that your estate would be subject to estate tax (estates worth more than $5.34 million for people who die in 2014), one way to reduce the value of your estate to an amount that is below the exemption amount is by making inter vivos (aka lifetime) gifts.
Contact us today to discuss your gifting plans and their potential tax benefits or consequences.