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Jon Andrews
Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
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Experience:  I deal with all levels of tax planning and controversy - from the ordinary to the complex.
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How much can I gift tax free to my children per year

Resolved Question:

I have never given any gifts to my children. I understand I can give $20,000 per year per child. But someone told me I can do more than $20,000 per year and that I don't have to set up a separate bank account for each child. I want to give as much as I can this year with the least hassle.

Optional Information:
Redmond, Washington






Submitted: 8 years ago.
Category: Tax
Expert:  Tammy F. replied 8 years ago.

The maximum that you can give per person is $11,000 with no tax consequences for the giver or for the receiver. If are giving the gift to a husband and wife, you can give $11,000 each (total $22,000). If the gifts are coming from you and YOUR spouse to your child and THEIR spouse, you can give up to $44,000.


Make sense?


Let me know if you still have questions.

Customer: replied 8 years ago.
Reply to Tammy Falkner's Post: This answer didn't address the second part of my question. Do we need to deposit $11,000 for each child/spouse into a separate account for that person, or can they be made to a single family account?
Expert:  Tammy F. replied 8 years ago.
It really doesn't matter. You can simply write them a check and let them make their own deposits or you can open an account in their name and make the deposit for them.
Tammy F., Not an active Expert
Category: Tax
Satisfied Customers: 9168
Experience: Not an active Expert
Tammy F. and 9 other Tax Specialists are ready to help you
Customer: replied 8 years ago.
Relist: I still need help.
Tammy,

Your feedback was very helpful. However, we had got   some previous advice that indicated that each individual has a life time limit of $1.5 million dollars s/he can receive from a parent. Is this true and if so how does it impact the $11,000 per year rule?
Expert:  Jon Andrews replied 8 years ago.

There is NO limit to the amount that you can receive as a gift in a year or in a lifetime. The "limit" applies to the amount that the giver can give without incurring gift tax consequences.


You can give $11,000 per person per person (as Tammy described above) in 2005. In 2006, that amount is increased to $12,000 per person per person.


The GIVER has a $1,000,000 "lifetime exemption". This lifetime exemption applies to gifts in excess of the annual exclusion amount. In other words, if you give one person $50,000 this year, $39,000 will be absorbed by the lifetime exemption.


The lifetime exemption applies to the giver in total - not on a per person basis. In other words, if you give $500,000 to three separate people in 2005, the first $11,000 falls under the annual exclusion. That leaves $489,000 per person for a total of $1,467,000 of gifts in excess of the annual exclusion. The lifetime exemption will cover the first $1,000,000 leaving $467,000 that would be subject to gift tax.


If you give gifts that are less than or equal to the annual exclusion, you never use any of the lifetime exemption.


In addition, the lifetime exemption will reduce the amount of unified credit that is available to offset estate tax when the giver dies.


jon@jonacpa.com


Customer: replied 8 years ago.
Reply to Jon Andrews's Post: Just to be finally clear on this, if I were to give a gift of $300,000 to one of my children this month, I would not need to pay gift tax on this as it is below my $1 million exemption. Is that correct.

Are there any tax consequences for the gift receiver?

PS: I feel like I am on overtime on this query so when I accept the answer I will pay another $50
Expert:  Jon Andrews replied 8 years ago.

You are correct that you would not be required to pay gift tax on that amount. The amount in excess of $11,000, i.e. $289,000 will be absorbed by your $1,000,000 exemption. You WILL need to file a gift tax return to report any gifts in excess of the annual exclusion (that is how the IRS keeps track of how much exemption you have used).


There are no tax consequences to the recipient.


jon

Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 3118
Experience: I deal with all levels of tax planning and controversy - from the ordinary to the complex.
Jon Andrews and 9 other Tax Specialists are ready to help you

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