“Gifting” is an important estate planning strategy for individuals who wish to spend down their potentially taxable estates or just want to share what they have with others. Federal gift tax is imposed on the giver of a gift (most commonly, money) that has a value greater than the annual gift tax exclusion amount.
Simply stated, you can give away any amount of money you want in any one year and not have to report the gift to the IRS, provided that the amount given to any one recipient does not exceed the annual gift tax exclusion amount. If it does, the giver of the gift must file a gift tax return, and the gift will reduce their lifetime gift tax exclusion amount ($5.49 million for 2017 and $5.6 million for 2018, per taxpayer).
After five years with no increase, the IRS recently announced that the annual gift tax exclusion amount will increase from $14,000 to $15,000 in 2018. The exclusion is per taxpayer, which means that a husband and wife can each make annual gifts to the same recipient up to the exclusion amount without reducing their lifetime gift tax exclusion amount. Some gifts are tax-exempt, including gifts to charitable organizations and gifts from one spouse to the other.
To learn more about gift taxes, visit the IRS website. If you have any questions or need assistance with this, you may wish to talk to your CPA or contact the attorneys at Wright Beamer at (248) 477-6300.
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