How much can you give away without getting hit by the gift tax?
For those thinking about making large financial gifts–how much money can you give tax-free?
Under the current federal tax laws, you can give away $15,000 per year (for 2018) completely tax free. In fact, if you give away $13,000 or less, you don’t even need to file a gift tax return. Plus, it gets better…
If you are married, together with your spouse, you can give away $30,000 per year ($15,000 per spouse). And that’s $30,000 per recipient. According to one of the best Estate Planning Law Firms in Washington, if you wanted to make yearly gifts to each of your four kids, you could give away a whopping $120,000 per year ($30,000 x 4) without even filing a gift tax return! These are federal laws that are the same from state to state so there is no avoiding Uncle Sam By moving somewhere else.
What happens if you give away more than the annual exemption? You’ll have to file a gift tax return for the year in which you make the gift, and the amount over the $15,000 exemption will count against your unified tax credit. For example, let’s say you made a $515,000 gift one year to one recipient. You just lost $500,000 of your unified tax credit. That means, under the current federal tax laws (2018), you (and your estate) have $10.5 million worth of tax exemption remaining. Remember, you can give away approximately $11 million tax-free.
In that example, let’s say you passed away with an estate worth exactly $11 million. Since you only have $10.5 million in exemption remaining, $500,000 of your estate will be subject to the federal estate tax. The federal estate tax rate is up to 40% for 2018. So, that big gift you made when you were alive just cost your estate $155,800! You could have avoided that tax consequence by making yearly smaller gifts.
If you want to give away a large sum of money, and you think you’ll be alive for a while longer, give away $15,000 each year instead of making one huge gift. This way, you won’t risk burning through your tax credit.
If you aren’t keen on the idea of giving $15,000 yearly to a younger recipient, consider establishing a trust for the benefit of the recipient. Then, your yearly gifts will go into the trust instead of going directly to the recipient.
By having some foresight and planning ahead, making yearly gifts instead of large lump-sum gifts can save your loved ones thousands of dollars. It’s worth talking to an Texas estate planning lawyer to discuss your options.
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Visit www.ShuttLawFirm.com for more information on Texas Wills, how to avoid probate in Texas, Texas living trusts, estate planning, probate, alternatives to probate, and guardianship – or email ishutt@shuttlawfirm.com.
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You can also call Mr. Shutt at (214) 302-8197 for more information on the topic discussed in this blog or to discuss a different legal matter. Phone-calls and quick e-mails are always free at Shutt Law Firm PLLC. Please consider the Shutt Law Firm if you’re looking for a McKinney lawyer for probate, McKinney Wills Lawyer, McKinney estate planning attorney, power of attorney in McKinney, TX, or guardianship attorney in McKinney area.
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