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Gift Tax

Why do you Have to Worry about Gift Tax?

By Gift Tax, Tax

Why do you Have to Worry about Gift Tax?

 

Well, you probably won’t have to worry about gift tax. Most people don’t, but the reason it’s there is so that people can’t make deathbed gifts and get rid of their estate for tax purposes.

The gift tax works in conjunction with the Federal Estate and Gift Tax. It’s all one thing. And so the reason being that you know, if technically you had $20,000,000 and some of it would be taxed at your death, and there at your deathbed, you know you’re going to die tomorrow, you give it all away to like your son and then take it all out of your estate.

The estate tax wouldn’t work if you could do that, so they make it so that if you make gifts over the annual exemption amount, which is $16,000 in 2022, you need to file a gift tax return. Gifts in excess of the annual gift exclusion amount go against your lifetime gift and estate exemption. So if you make a big gift this year, all it does is brings down the amount that is exempt later, so you still have that whole total amount and so if you are concerned about these things, give us a call (267) 573-1019.

What is the Annual Gift Tax Exclusion Amount?

By Gift Tax, Tax, Taxes

What is the Annual Gift Tax Exclusion Amount?

 

What is the annual gift tax exclusion amount in 2022? The amount is $16,000 per person, and in 2023 it’ll be $17,000 per person. 

What does that mean? It means that you can give up to $16,000 to as many people as you want, and it will not affect your future estate taxes, and you don’t have to file a gift tax return. It’s not taxable to you. 

And gifts to recipients are never taxable to them, so anytime you make a gift to the recipient, they know don’t ever pay income tax on that. Something a lot of people don’t understand. 

If you make a gift above $16,000, it doesn’t mean that’s taxable either. It just means that you should file a gift tax return. And if you do that, what will happen is it will reduce your lifetime amount, your exemption amount, lifetime exemption amount now is over $12 million per person. So most people can afford to make those gifts without having a big taxable estate at the end of their lives.

Should you File a Gift Tax Return?

By Gift Tax, Taxes

Should you File a Gift Tax Return?

 

 

Maybe. It depends, did you make gifts? 

In 2022, the annual gift tax exclusion amount is $16,000 per person, and in 2023 that amount is $17,000 dollars per person. The per person is for the recipient of the gift. So you can make a thousand gifts of $16,000 and not have to file a gift tax return, but if you make one gift of twenty thousand dollars, then you would have to file a gift tax return. 

Remember, married spouses can use two of those exclusions, so if you and your spouse decide to give one of your kids $32,000 this year or $34,000 next year, you don’t have to file a gift tax return. 

You likely won’t have to pay any tax. All it will do is reduce the amount that you can exempt at your death from the Federal Estate and Gift Tax, and at the rates that we have now, very, very few people have to actually pay those. Now that could change in the future, taxes change a lot, but right now the federal estate taxes are not a concern for most people.