Gifting Limits

January 17, 2019
Gifting Limits

Did you know that if you give away too much money, you must pay taxes on the gift?

Yes, so the IRS sets annual gifting limits every year. Sometimes the limit doesn’t change from the prior year. For a long time, it was $10,000 per person per year. I’m going to attempt to explain the very complicated gifting rules and gift tax in an extremely simplified manner. Big picture, if you give away too much, then the IRS looks at it like you are trying to give away your assets for nefarious reasons. This includes things like trying to qualify for Medicaid, lower your estate for tax purposes, or moving assets to someone in a lower tax bracket. So, they set limits on how much you can give away per person, per year, and in your lifetime. A good attorney can help you navigate these rules and point out how you can use them to your maximum advantage with different types of special trusts.

Here are some rules of the road:

  • If you are married, you can usually* give as much as you want to your spouse.
  • In 2018, you can give $15,000 to any one person with no consequences. This is called the Annual Gift Exclusion Limit.
  • If you are married, you can do what is called a “split gift.” Meaning, you can give $30,000 to one person, from your account, but if your spouse consents, then it can be considered a gift from both of you, and therefore, $15k from each person, which is the limit.
  • There is a special rule for 529 plans where you can frontload it with 5 years of gifts all at once.
  • The annual lifetime exemption is $5.6 million (as of 2018), which is the same as the estate tax exemption, which is the same as the Generation Skipping Tax (GST) exemption. These things are typically the same amount, but it doesn’t mean that you get 3x the amount to gift….you are subject to one exemption, which counts towards different things, simultaneously.
  • If you gift “too much” to one person in a year, it should be reported on a Form 709, the gift tax return.
  • The giver is always responsible for the tax. The givee never pays any tax to receive the gift.
  • What is a gift? It can be cash, but it can also be the value of things, like a car, or house, or securities, which is why you need to be careful when you add someone’s name to an account or property. (It can be considered a gift.)
  • If you give directly to these institutions, it does NOT count against your annual exclusion or lifetime exemption:
    • tuition or medical expenses you pay for someone (the educational and medical exclusions).
    • Gifts to your spouse.
    • Gifts to a political organization for its use.
    • In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.

For further info, you can go to https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes#3.

Happy gifting!

*Exceptions are if the spouse is not a U.S. citizen, but you are.

 

Any opinions are those of Jill Carr and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

Neither Raymond James Financial Services nor any Raymond James Financial Advisor renders advice on tax issues; these matters should be discussed with the appropriate professional.

<< Back

How can we help you?

MICHIGAN5206 Gateway Centre, Suite 300 // Flint, MI 48507 //
Phone: 810.732.7411 // Fax: 810.732.8190 //
Map and Directions
FLORIDA712 S. Oregon Avenue // Tampa, FL 33606 //
Phone: 813.251.1879 // Fax: 813.251.1716 //
Map and Directions

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Stephens Wealth Management Group is not a registered broker/dealer, and is independent of Raymond James Financial Services. Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact our office for information and availability. © Raymond James Financial Services, Inc., member FINRA/SIPC | Privacy Policy

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.