December 5, 2017

Gifting – Don’t Scrooge Yourself

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Tis the season to think of ways to help and put a smile on your loved one’s faces.  If you are thinking of giving a substantial monetary gift, you should know the tax implications beforehand.

Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, must be filed if a gift exceeds the annual exclusion of $14,000 for 2017 (increased to $15,000 for 2018), or for a gift of future interests.  Future interests include reversions, remainders, and any other delayed interest.  A taxpayer can gift up to $5,490,000 for 2017 in their lifetime, without incurring gift tax (increased to $5,600,000 for 2018).

Tuition to an educational institution or payments to any person who provides medical care are not considered gifts; however, the payments must be made directly to the provider.  If the payments first go to the donee and then to the provider and exceed the annual exclusion, then a gift has occurred.

Spouses have unlimited gifting abilities to each other due to the marital deduction.  Spouses also have the ability to split gifts.  This means that even if one spouse makes a gift, the gift can be treated as being given by both spouses equally, as long as both spouses consent.  Split gifts allow spouses to combine their annual exclusion, which means up to $28,000 in 2017 can be excluded (increased to $30,000 for 2018).

The rules of gifting can be difficult to navigate, and we encourage you to reach out to one of our tax professionals for any questions you may have regarding your tax situation.