Monetary Gift Giving

[arock01503]

Is there a resource or article archived that talks about monetary gift giving to one's children?  I am looking for info on tax implications for the gift giver and the gift receiver, as well as advice of any kind on this matter.  Should I seek help from a tax attorney or a CPA or who?

[GailL1]

Investopedia  - Estate Tax 2022

The amount of the estate tax exemption for 2022

For 2022, the personal federal estate tax exemption amount is $12.06 million (it was $11.7 million for 2021). This means that when someone dies and the value of their estate is calculated, any amount more than $12.06 million is subject to the federal estate tax unless otherwise excluded. A married couple has a combined exemption for 2022 of $24.12 million ($23.4 million for 2021).

. . .  an estate with a gross estate value above $12.06 million—after adding adjusted taxable gifts and subtracting the amount greater than the exemption amount—then that excess is subject to the estate tax

You can give up to the (IRS) specified limit every year to anybody without filing a gift tax form - over that and the giver files a gift tax return but it is only for documentation against the estate when they die; no tax is due either to the giver or the receiver in the year(s) given.  It is when the estate holder (giver) dies that these gift tax returns of the overage gift amount(s) are added back to the estate for potential estate tax computation.

The Internal Revenue Service (IRS) sets limits on how much you're allowed to gift before you must file a return and before you are taxed. Sums over the annual thresholds are reportable and count toward a lifetime gift tax exemption amount. Once this generous allowance is exhausted, the gift tax becomes payable.

But I guess one never knows when their estate might accumulate the value of $12.6 MILLION or $24.12 MILLION (joint)  so if you give over the gift limit in any given year to any person - just file the return just to be safe.

[arock01503]

Thank you, Gail.  I appreciate your reply and it has just the info I was hoping to find.  I think this would make a good article in one of the AARP periodicals as I'm not sure people know the limits and the filing requirements.  Thanks again.

[roachme]

The general guidelines are on the IRS website, Form 709 Instructions.

https://www.irs.gov/pub/irs-pdf/i709.pdf

Verify everything with a tax preparer.  For 2022 you may give up to $16,000 per person per year without any tax implications.  No limitation to the number of people.  You can give more but giving more requires you fill out the IRS Form 709 to file with your taxes and it counts against the lifetime gift amount.

Since you can transfer to multiple people, you can transfer $16,000 to each child, their spouse, and each of the children each year without any tax filings.  Each check has to be in a different person's name but you could transfer up to $64,000 to a family of 4.  Now, if you are married, your spouse can also transfer $16,000 to each of those same people too and still no gift tax or tax paperwork to file for you or the recipients.  So a married couple could transfer $128,000 a year to a family of 4 without any tax implications.

You can also pay for a child or grandchild education tuition and it won't count against the gift amount as long as the money is paid directly to the institution.  You can't give them the money to pay for it and then they pay the tuition.  It also doesn't apply to books, supplies, room, board, etc.  Tuition only.  So you could pay for a grandchild to attend a private school and it wouldn't count against the gift amount.

[arock01503]

Thank you!

[AARPJodeeR]

Hi arock01503  It's never a bad idea to seek a professional opinion, and a great start would be a qualified tax preparer or accountant. You will also find valuable information on our website under Estate Planning and also Money, and I found a relevant article that will get you started: https://www.aarp.org/money/budgeting-saving/info-12-2012/wise-holiday-gift-giving.html.

Take care!

[arock01503]

Thank you!