how much money can we give our children each year and what are the tax consequences for them and us?

Answer 1

It is only the donor of the gift that may have tax consequences. The receiver of the gift does not need to file return or has any gift tax consequence. Each parent can give $12,000 to each child without any filing requirement.

1. A person can give any number of gifts of less than $12,000 to any number of persons. No tax is payable on these gifts. The person who receives a gift of any amount does not pay. Only donor may have to pay the tax.

2. Some States do collect tax on gifts from the person who received the gift. So check at your state web site.

3. All gifts of more than annual exclusion amount ($12000 for 2006) must be reported by the donor. A person making a gift in excess of $12K must file Form 706 to document the gift. But that does not mean that he/she will pay gift tax. There is a life time exclusion limit of $1 million.

4. If you are married, both you and your spouse can separately give up to $12,000 to the same person without any gift tax consequence.

For More information, IRS Publication 950-- Introduction to Estate and Gift Taxes; it has only 5 or 6 pages.
http://www.irs.gov

Answer 2

Each individual can give up to $12,000 to anyone without having to file a gift tax return. Therefore, a married couple could give up $24,000 to each child without tax ramifications.

If you go over these limits, a gift tax return must be file but, unless you have already given away a lot of money, no gift tax would be due.

Note: There are special rules for gifts for tuition payments given directly to a college and gifts for medical expenses given directly to a hospital.

Answer 3

I think in california, the most of a one time monitary gift you can give is less than $10,000 before having to pay a "gift tax"

When my gramma passed away and left us money, we had to pay the "gift tax" because it was over $10,000