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Financial Planning Tip April 2024

Updated: Apr 17

Gifting and Gift Taxes. If you give large gifts to another person, you probably know about the federal gift tax rules. Here is a little refresher on how the rules work and how to make sure you are not on the hook for taxes.

  • For 2024, you may give up to $18,000 worth of money or property to another person tax-free. You do not need to file any tax forms.

  • If you give more than $18,000 to a single person, you will need to file a gift tax return. You won’t necessarily owe tax on this gift. But you do have to file IRS form 709 and disclose the gift.

  • Gifts between spouses do not apply. You may transfer an unlimited amount of money or property to your spouse. (If your spouse is not a U.S. citizen, there are other rules.)

  • Each spouse may give a maximum of $18,000 to any one person, so both spouses together can give up to $36,000 total to a single person.

  • If you exceed the annual limit and file form 709, the amount counts toward your lifetime gift tax limit. Once this is exhausted, you could owe gift tax. The lifetime gift tax limit is currently $13.61 million per giver.

We receive many questions about gifting from our clients. Here are the answers to some of these:

  • Donations to a qualified charity are not gifts; They are tax-deductible donations.

  • Gifts to individuals are not charity and are not tax deductible.

  • Gifts of appreciated securities retain their original cost basis. The recipient pays the capital gains tax upon sale.

  • Paying for your daughter’s wedding or her education is not generally considered a gift. Be sure to pay for these things directly rather than reimbursing her for the costs. This will make it clear that it is not a gift. (However, giving your daughter money for a honeymoon, for instance, would be a gift.)

  • Giving your child an interest-free loan or forgiving a loan is considered a gift by the IRS. Be careful about lending money to friends and family. If you do, always document the loan and the interest payments in a written agreement.

  • There is a special rule for 529 plans that allow the giver to invest a larger sum in this education account and spread the gift tax across five year.

If you have additional questions about gifting, we’d be happy to help anytime.


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