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What are our tax liabilities when we gift a large sum of…

What are our tax...

What are our tax liabilities when we gift a large sum of money and a house to our kids?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

This year we have given our two daughters each a house and transferred a large amount of money into their accounts in lieu of getting it when we die.

Accountant's Assistant: Is there anything else important you think the Accountant should know?

I don’t think so.

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Answered in 3 minutes by:
12/11/2017
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,859
Experience: Taxes, Immigration, Labor Relations
Verified

For your kids - the gift is NOT taxable income and is NOT reported on their tax return.

Regardless if the value of the gift.

All gifts are specifically excluded from taxable income for income tax purposes.

For you as a donor - there is an annual gift exclusion - up to $14,000 you may gift to every person you want without any reporting requirements.

Gifts above that limit will be treated as "taxable gifts" and you will be required to file a gift tax return.

However - there will not be any gift tax liability as long as your lifetime limit is not reached.

For 2017 the lifetime limit is $5,490,000.

Let me know if you need any clarification this matter.

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Customer reply replied 5 months ago
the “gift tax return” filing is just for keeping track of how much we have gifted?
Customer reply replied 5 months ago
Why the $14,000 gift exclusion?

That is correct - gifts below $14,000 per person per year are NOT taxable gifts - and these are not counted toward the lifetime limit.

Gifts ABOVE $14,000 are taxable gifts (for gift tax purposes) and the part above the limit are counted toward the lifetime limit.

That is why the IRS requires to keep track of what part of the lifetime limit is used up.

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Customer reply replied 5 months ago
$5,490,00 is a hefty amount to add up. It can happen, I guess.
Customer reply replied 5 months ago
Thank you!

If your net worth is much less than the lifetime exclusion - that might be nothing to worry.

But for some people that could be a big issue.

To add complications - the lifetime exclusion is adjusted every year - so we woudl need to keep track of indexed exclusion if you make taxable gifts in several years.

Then - the exclusion amount will be used as exclusion from taxable estate when you die.

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Customer reply replied 5 months ago
Oh, in that case it’s something to worry about because our net worth is above the lifetime gifting amount.

Yes - that is correct.

So you may want to plan your estate - and ho wit will be passed to beneficiaries - and avoid estate taxes.

It might be not so simple as the estate tax law might change in coming years.

But you may start "gifting out" your assets and relatively small amount may be passed to your children.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,859
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
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Customer reply replied 5 months ago
will do. Thank you very much!
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Lev
Lev
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