Nothing is tax free, right? It can seem that way unless you are giving away some of your money. Even if you are not super wealthy or super generous, gifting can be a tax-free process and also help reduce your estate tax.
Important things to know about gifting include:
- Gift givers, not recipients, have to pay the gift tax, when applicable.
- You are only required to pay a gift tax after a lifetime gift exceeds $5.43 million.
- If you are married, both you and your spouse EACH have a lifetime gift allowance of $5.43 million without paying taxes.
- In 2016, the annual exclusion to the federal gift tax allows you to gift up to $14,000 to an unlimited number of individuals without counting against your lifetime exemption. These gifts will also reduce your estate taxes.
- You will need to file a gift tax return if you make a gift in excess of the annual exclusion as noted above (Form 709: U.S. Gift Tax Return.)
*It is best to consult with a CPA or a financial advisor before making financial decisions. The IRS also provides answers to FAQ’s on its website (www.irs.gov).