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It seems Uncle Sam gets a cut of everything. From the stack of cash you slipped into your teenage son\u2019s birthday card to that brand new washing machine grandpa handed down to your daughter, it often feels like the federal government is taking a bite out of your generosity. But it doesn\u2019t have to be that way. In fact, there\u2019s actually a pretty generous gift tax exemption that can help keep the IRS out of your giving.<\/p>\n
The amount of a tax free gift depends on how much you give and who you give it to. The IRS has an annual exclusion limit for gifts of up to $16,000 in 2022 ($17,000 in 2023) per person that can shield your generous gifts from gift tax. You can also share this exclusion limit with your spouse if you are married. If you go over these limits, however, you will be responsible for paying the gift tax.<\/p>\n
But don\u2019t worry too much about having to pay the gift tax. There are ways to avoid it, like creating a revocable trust or setting up a life insurance policy with the right beneficiary designations. However, it\u2019s always best to work with a tax professional because there are lots of nuances and rules to understand when it comes to the gift tax.<\/p>\n
Basically, the IRS defines a gift as anything of monetary value you give to someone without getting something of equal value in return. That includes cash, property deeds, stocks and even benefits from annuities or life insurance policies. Forgiving a debt or lending money at below-market interest rates is also considered a gift. The IRS also looks at how much you sell something for when assessing its taxable value. The sale price must be at or below fair market value (FMV) to be considered a taxable gift.<\/p>\n
So if your rich uncle hands you a $21,000 check, you may have to file a gift tax return because it\u2019s above the annual exclusion limit. But don\u2019t despair, he\u2019s probably not going to get slapped with a gift tax because the extra $13,000 simply counts toward his lifetime exclusion.<\/p>\n
But it\u2019s important to remember that the $17,000 you gave to your brother this year will also whittle away his lifetime exemption, and once it goes down to zero, you will be required to pay the gift tax. So it\u2019s important to plan accordingly if you want to take advantage of the generous exemptions available to you.<\/p>\n","protected":false},"excerpt":{"rendered":"
It seems Uncle Sam gets a cut of everything. From the stack of cash you slipped into your teenage son\u2019s birthday card to that brand new washing machine grandpa handed down to your daughter, it often feels like the federal government is taking a bite out of your generosity. But it doesn\u2019t have to be […]<\/p>\n","protected":false},"author":1,"featured_media":326,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-319","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bedroom-lights"],"_links":{"self":[{"href":"https:\/\/www.njfightshop.com\/index.php\/wp-json\/wp\/v2\/posts\/319","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.njfightshop.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.njfightshop.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.njfightshop.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.njfightshop.com\/index.php\/wp-json\/wp\/v2\/comments?post=319"}],"version-history":[{"count":2,"href":"https:\/\/www.njfightshop.com\/index.php\/wp-json\/wp\/v2\/posts\/319\/revisions"}],"predecessor-version":[{"id":327,"href":"https:\/\/www.njfightshop.com\/index.php\/wp-json\/wp\/v2\/posts\/319\/revisions\/327"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.njfightshop.com\/index.php\/wp-json\/wp\/v2\/media\/326"}],"wp:attachment":[{"href":"https:\/\/www.njfightshop.com\/index.php\/wp-json\/wp\/v2\/media?parent=319"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.njfightshop.com\/index.php\/wp-json\/wp\/v2\/categories?post=319"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.njfightshop.com\/index.php\/wp-json\/wp\/v2\/tags?post=319"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}