In this video, we discuss taxes on gifts and explore three ways to avoid certain gift taxes.
Yes, there is a federal tax on gifts. Here, we explore three ways to avoid certain gift taxes.
Annual exemption amounts:
In 2021, we all have a $15,000 annual exemption, and we can gift to anyone. It is important to note that this is a per recipient dollar amount. This means that we could give 10 people $15,000 each. A more common example would be a married couple gifting to a child. They could gift a total of $30,000; $15,000 per spouse.
Lifetime exemption amount:
If you’re making a larger gift, you would file a 709 gift tax form to use some of your lifetime amount. In 2021, this is $11.7 million. If the gift is coming from a married couple, you would split the gift amount between each spouse.
Give directly to educational institutions, medical institutions or health care providers:
You can also make gifts to educational institutions to cover someone’s tuition and qualified educational expenses or medical facilities or other healthcare professionals to cover a person’s medical expenses. However, it is important in these two cases that you make the gifts directly to the educational and medical provider.
In addition, you can give unlimited amounts to charities or to your spouse. The reality is that most of us will not have to pay gift taxes. However, if you’re in the small percentage that do, you will want to maximize the strategies around the exemption amounts, so that you can maximize your gifts.
If you have questions or if you need help, please reach out to us directly.