3 ways to avoid gift tax

8:03 PM
3 ways to avoid gift tax -

3 Ways to Avoid a Gift Tax - TaxAct Blog

If you give generous amounts of money to a friend or family member, you may be required to pay a gift tax to the IRS. However, with a little planning, you can afford to be generous enough before stepping out the Form 709 to report the amount on line and pay the extra money.

Here are three easy ways to steer clear of the gift tax.

1. Double (or quadruple) your limit

The key to avoiding a gift tax is not to give more than the annual exclusion amount to a person in a given tax year. For 2016, this amount is $ 14,000. This means that if you want to give $ 14,000 each ten people in a year, the IRS will not care. However, if you give $ 15,000 to one person, you have to pay a gift tax.

The annual exclusion amount will periodically rises due to inflation, so it is important to double check the amount of each tax year to make sure you don 't overlook the limit .

Being married is an easy way to double your power to give both you and your spouse are entitled to the annual exclusion amount on a gift. As long as the gift is made from the common property, the IRS estimates that the donation is half of each. Therefore, you and your spouse can give $ 28,000 in total.

The same rule applies when you give someone who is married. You can give an extra gift up to $ 14,000 to the beneficiary's spouse, making the annual limit of a couple in another two $ 56,000 ($ 14,000 x 4 = $ 56,000).

2. Pay your medical bills or tuition directly

Although it may seem to give a $ 50,000 check to a small-son to head to college is the same that writing the check directly to college -. At the IRS, it is very different

wrote a check to a college tuition does not count as a donation for the purpose of gift tax. However, a check written to your grand-son, no matter what he does with it is considered a gift.

The same is true for medical bills. If you pay the money directly to the medical institution, it is not a gift.

If you want to help a family member with a college or medical expenses, it may be better to pay directly at the property to avoid taxes.

3. Spread the gift between years

If you are tempted to make a great gift for the holidays, consider splitting the donation into two checks instead.

For example, if you want to give your adult son only $ 20,000, the first write him a check for no more than $ 14,000, then wait until the new year to give him the remaining amount.

what if you have already given more than the limit?

do not worry.

depositing a donation statement is not difficult, and in some cases, you can not actually owe any further tax.

The amount of donations on annual limits are added throughout your life. You do not need any tax until it exceeds the total life, which is currently set at $ 5.45 million per person (2016).

Previous
Next Post »
0 Komentar