Knowing the tax rules on giving helps you make wise financial decisions.
You want to save money.
You want to be wise with your resources.
But you also enjoy giving.
Are these mutually exclusive?
According to a recent The Newark Advocate article titled “Clarifying gifting tax misconceptions,” the answer is no.
You can give away up $14,000 to each recipient each year (increasing to $15,000 beginning January 1, 2018).
You will not have to file a Form 709 gift tax return, if you do not exceed this limit.
You can double this amount to $28,000 ($30,000 beginning January 1, 2018).
Does this mean you cannot give more than these amounts?
You can gift as much money as you please, but you must report the amount in excess on a Form 709 gift tax return.
Does this mean you have to pay taxes?
It means this amount will reduce your overall estate and gift tax exemption.
In 2017, the federal estate tax exemption is $5.49 million (increasing to $5.6 million per taxpayer on, you guessed it, January 1, 2018).
If you gave $1 million in excess of the annual amount, your estate and gift tax exemption limit would be reduced to $4.49 million.
This could cost you 40 percent on the money in your estate at death above this limit.
What if your excess gifts breach the $5.49 million limit.
You will owe taxes on these.
As you can see, giving gifts is really part of your overall estate tax planning.
Work with an experienced estate planning attorney to make sure you are planning properly.
So, how do you find an "experienced" estate planning attorney?
First, ask around. Friends, family and other professional advisors are trustworthy sources.
Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "Estate Planning Anytown MoKan").
Third, either way, verify! Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.
In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Newark Advocate (September 24, 2017) “Column: Clarifying gifting tax misconceptions”