Did you know that this year you can give gifts of up to $14,000 to as many individuals as you want without being liable for gift tax? Normally, any gift you make counts towards your lifetime exemption from gift and estate taxes. That’s so you don’t just give away your estate shortly before death to avoid estate taxes.
But each year you can make an unlimited number of gifts free of tax, provided they’re below a certain amount. The limit for 2013 is $14,000 per gift. A husband and wife each have their own separate limit, so they can jointly give up to $28,000 to any one person.
You can put the gift exclusion to good use in several situations. For example, you could use a multi-year gift program to decrease the size of your estate and reduce estate taxes. A married couple giving to each of their three children could reduce their estate by a total of $84,000 every year, for example.
You could also use the gift exclusion in an income-shifting strategy. You could make gifts of income-generating assets to your children who are in a lower tax bracket. If done carefully to avoid the “kiddie tax,” the result can be a lower overall tax bill for the family unit.
Two types of gifts are exempt from the $14,000 limit. You can make unlimited gifts for tuition expenses or medical expenses on behalf of any person, provided you make the payments directly to the educational institution or health care provider.
The 2013 gift exclusion expires when 2013 does, so act soon if you want to use this tax break.
Please call ths office for more information if you think this may apply to you.
Tags: Expiring tax provision
Written by: Doug Rodrigues