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Myths About Gifting In America


Gift box of moneyIn 2017, a person can give up to $14,000 per recipient per year without having to file a Form 709 gift tax return. A married couple may give $14,000 each or $28,000 total per recipient each year.

The Internal Revenue Service has very specific rules for gifting.  If used properly, these rules can be beneficial to the giver.  Questions frequently come up during estate planning about making monetary gifts to others. They include:

  • How much of my money can I give away each year?
  • What are the taxes for gifting?
  • Does the recipient have to pay tax on the money they get?

There aren’t any restrictions on the amount of money that you can give someone.  However, if you give more than $14,000 per person, it must be reported as a gift. The giver must file a 709 gift tax return for that year to report the exceeding amount.

A common misunderstanding in this area is that someone has to pay tax on the amount recorded. This is not true. The gift amount simply is counted against and reduces the person’s federal estate tax exemption amount. That amount is $5.49 million per individual in 2017.

 Since the gift tax and estate tax exemptions are intermixed, if you gift $1 million over and above the annual gift exclusion amount throughout your lifetime, at your death, your federal estate tax exemption amount would be reduced to $4.49 million. Your estate would have to pay a tax at 40% on the assets above $4.49 million. During your lifetime, if you use up your $5.49 million gift exemption, you’ll need to pay tax on any additional reportable gifts you make.

Remember, however, that a deceased spouse can pass their unused estate tax exemption to their surviving spouse. As a result, the survivor could have a maximum of $10.98 million of estate tax exemption at death, if it wasn’t previously used up due to taxable gifts reported on the Form 709 return.

Therefore, just give no more than $14,000 per person per year and you won’t have to be concerned about filing a gift tax return or decreasing your allotted federal estate tax exemption amount.  Regardless of the amount, the recipient does not have to pay tax on the gift received.

Reference: Newark Advocate (September 24, 2017) “Column: Clarifying gifting tax misconceptions.


 

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The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.