I was always under the impression that any monetary gifts to my children would cost me a substantial gift tax. I recently heard that in reality, it would just reduce the amount of estate that I can leave "tax free" at the time of my death.
2007-09-20 00:42:12 · 7 answers · asked by SanD 1 in Business & Finance ➔ Taxes ➔ United States
You can give up to $12,000 per person per year with no tax consequences, and if married, your spouse can also give up to $12,000 to that same person. If you go over the $12,000 per person limit in a year, you would have to file a gift tax return, but have a $1,000,000 lifetime exclusion that you could use excess gifts against before having to pay any tax at all.
Ninasgramma, the gift tax exclusion is only $1,000,000 not $2,000,000. The $2,000,000 exclusion is for estate tax purposes not gift tax purposes.
2007-09-20 02:06:05 · answer #1 · answered by Anonymous · 1⤊ 0⤋
It depends on how much you give them. You can give each of them up to $12,000 each year without any gift tax effect. If you have a spouse, you can each give them that amount, so each child could get $24K a year and you wouldn't report it.
You have to report amounts given over those limits. You don't have to pay a gift tax until the total of the part of the gifts over the limit reaches $1 million - that's cumulative, not per year. For the first million dollars, as you heard, it would reduce the amount of your estate that you can leave tax free, but you wouldn't have to pay a gift tax the year you make the gift.
2007-09-20 03:22:49 · answer #2 · answered by Judy 7 · 1⤊ 0⤋
Your more recent information is more accurate.
If you give a child a gift of less than $12,000 in one year, there are no tax consequences now or for your estate.
If you give a child a gift of $12,000 or more, that gift is subtracted from your lifetime exclusion of $2 million.
Only when you exceed your lifetime exclusion will gift tax be owed.
When your estate tax return is filed (if one is required), then your nonexcludible gifts may cause your estate to owe some taxes. This would happen when the estate plus the gifts total more than $2 million.
2007-09-20 00:57:30 · answer #3 · answered by ninasgramma 7 · 1⤊ 1⤋
If you gave each child 12000 every year until you died you wouldn't have to pay gift tax on it. This can reduce the amount of money you have in your estate when you die, it is really advantageous if these gift put your estate under the 2 million dollar mark, then your children would not have to pay estate taxes on it as well.
2007-09-20 15:31:46 · answer #4 · answered by Anonymous · 0⤊ 1⤋
Also, the $2M estate tax exclusion will be going up in future years. The details are indefinite because both sides agree that new legislation will be passed by 2010.
Also, you can pay tuition and medical bills for them (paid directly to the providers). This does not "count" toward gift or estate taxes.
2007-09-20 05:39:44 · answer #5 · answered by r_kav 4 · 0⤊ 0⤋
you have the choice, first off you should know you are allowed to gift a certain amount to each child each year- tax free, that annual exclusion amount in 2007 will be $12,000. So anything over $12,000 you will be expected to pay gift tax on. You have a choice if you want to pay it at the end of the year, or you can offset the taxes into your estate by using a unified credit, by doing that it MAY reduce the amount of money you can leave behind tax free.
most people opt for offsetting the tax untill estate, and another thing to keep in mind is that the amount of money that can be left tax free in estate is a great deal of money, and unless you pass away with millions left behind- chances are that gift tax will never be charged to your estate. that all depends on the amount of money you are gifting now, and the amount of money you leave behind,but holds true for the average person.
also....who is going to know you gifted money to your kids anyway???? in my opinion I would not volunteer that information- personally i think what you do with your money is your buisness and if you want to give it to your kids than go for it. think of it realisticly- the government is not going to ask you what you spent it on...not unless your in some kinda federal trouble for tax evasion or your assets are froze.
Besides that - its almost the end of the year so if you want to make a gift while keeping everything by the books legal- you should do so by the end of the year to take advantage of that annual exclusion.
2007-09-20 02:15:47 · answer #6 · answered by mary h 4 · 0⤊ 2⤋
Yes....unless you're near your lifetime exclusion for gifts, gift tax would probably not be owed.
If you give over $12k to any one person, a gift tax return would need to be file but, chances are, no tax would be due.
2007-09-20 01:53:37 · answer #7 · answered by Wayne Z 7 · 0⤊ 0⤋