The tax code allows you to give away up to $13,000 each year to as many people as you want, without triggering gift tax. If you and your spouse “split” your gifts, you can double this $13,000 annual gift-tax exclusion and give $26,000 per recipient.
If you’re thinking of sharing your wealth, here are some important gift-giving considerations.
* All gifts during the year, including birthday and holiday presents, count toward the $13,000 (or $26,000) annual gift tax exclusion. For example, say you give a $500 birthday present to your grandchild. You may give another $12,500 to that grandchild during the year without triggering the need for a gift tax return.
* A gift made by check isn’t complete until the recipient actually deposits or cashes the check. Plan accordingly when making year-end gifts, especially if you want such gifts to be counted toward this year’s gift tax exclusion.
* For a gift to be valid, you must part with ownership. Pay special attention to gifts of stock in the family business or gifts of your personal residence.
* Three types of gifts are exempt from the $13,000 limit. You can make unlimited gifts for tuition expenses or medical expenses on behalf of any person, provided you make the payments directly to the educational institution or health care provider. You can also make unlimited gifts to your spouse.
If you would like to discuss the benefits of making tax-free gifts, please contact our office.