Last year, I gave a family member $15k. Can I do it again this year without having to deal with gift taxes? Is there any limit to how much I can give them?
The $18k limit you’re referring to is just a threshold for reporting. You’ll need to file a gift tax return if you go over that amount in a year, but it’s not an actual tax. It just gets applied to your lifetime exclusion, which is really high, in the millions. The limit resets every year.
The gift tax limit is annual, so you can give up to the allowed amount each year without any issues.
People get confused about the gift tax limit. You can give more than $18k in a year, but anything over the limit needs to be reported to the IRS using Form 709. The extra amount just gets counted against your lifetime exclusion, which is about 13 million dollars. You won’t pay any tax unless you exceed that.
You can give up to $18k a year without hitting any tax issues. I’m waiting for my parents to do this for me!
Gift taxes generally don’t apply unless you have a really large estate, with the lifetime exclusion currently at around 14 million.
You do have to report gifts over $18k per person each year. For example, if Bob and Jane want to give their daughter Mary and her husband Steve money, they can give $72,000 without filing any forms like this:
- Bob gives Mary $18k
- Bob gives Steve $18k
- Jane gives Mary $18k
- Jane gives Steve $18k
If they just gave Mary $72k in one go, they’d need to file Form 709 with the IRS, but no actual tax would be due since their estate is under the limit.
Check with your CPA, but generally, you should be fine.
In my case, a relative gave their grandchild $80k as a wedding gift and for a new house. This was considered part of their future inheritance. We were told that unless the relative had given away more than 14 million dollars in their lifetime, there wouldn’t be any tax to worry about.
Aspen said:
@Dallas
So, did your family end up paying any tax on that gift?
No tax was owed. The gift just had to be reported to the IRS since it was over $18k. The IRS tracks these things to make sure people don’t give away more than 14 million in their lifetime. But as long as you stay under that, there’s no tax. States may have their own rules, though.
If you give $18k or less, you don’t need to report it. If you give more, you need to fill out Form 709. But no taxes are due until you exceed that lifetime limit.
Aspen said:
@Dallas
So, did your family end up paying any tax on that gift?
Nope, no taxes were paid. The only time taxes would come into play is if the grandfather gave away more than 14 million dollars during his life.
Aspen said:
@Dallas
So, did your family end up paying any tax on that gift?
Giving more than $18k doesn’t mean you get taxed right away. It just has to be reported so the IRS can track it. You won’t owe any taxes until you exceed the lifetime limit of $14 million. It’s only after that point that taxes come into the picture.
Aspen said:
@Dallas
So, did your family end up paying any tax on that gift?
If you exceed the annual limit, you file a gift tax return. That amount gets counted towards your lifetime exclusion, and tax is only owed if your estate exceeds the taxable limit after you pass away.
Yes, the gift limit is per year, so you can give another $18k this year without any problems.