If you give someone money or property during your lifetime, you may be subject to the federal gift tax. The following tips will help you determine if your gift is taxable or if you are required to file a gift tax return.
1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you give a gift to your spouse or to a charity. If you give a gift to someone else, the gift tax usually does not apply until the value of the gifts you give to that person during the year exceeds the annual exclusion for the year. For 2013, the annual exclusion is $14,000.
2. Gift tax returns do not need to be filed unless you give someone other than your spouse money or property worth more than the annual exclusion for that year.
3. Generally, the person who receives your gift will not have to pay any federal gift tax. Also, that person will not have to pay income tax on the value of the gift received.
4. Giving a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you give (other than gifts that are considered deductible charitable contributions).
5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
- Gifts that are not more than the annual exclusion for the calendar year;
- Tuition or medical expenses that you pay directly to a medical or educational institution for someone (this person does not have to be your dependent);
- Gifts to your spouse;
- Gifts to a political organization for its use; and
- Gifts to charities.
6. Gift splitting – you and your spouse can give a gift valued up to $28,000 to a third party without it being a taxable gift. The gift is considered as two halves: one half from you and one half from your spouse. If you split a gift that you give, you and your spouse must each file a gift tax return to show that you both agree to split the gift. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return even if half of the split gift is less than the annual exclusion.
7. Gift Tax Returns – you must file a gift tax return (Form 709) if any of the following apply:
- You gave gifts to at least one person (other than your spouse) that were more than the annual exclusion for the year;
- You and your spouse are splitting a gift. In this case, each spouse files a gift tax return—joint gift tax returns are not allowed;
- You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until sometime in the future; or
- You gave your spouse an interest in property that will terminate due to a future event.
8. You do not have to file a gift tax return to report gifts given to political organizations, most gifts to qualified charitable organizations, and gifts through which you pay someone’s tuition or medical expenses.
If you have questions or need assistance, contact the Experts at Henssler Financial: experts@henssler.com or 770-429-9166.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
