Tax Laws on Gifts
When you give someone money or property without expecting something in return, you sell property at a significant loss or you extend an interest-free loan, it may be considered a gift. Gifts may be subject to a federal gift tax; however there are a number of exceptions. If you play your cards right, you may be able to avoid the gift tax altogether.
Other People Are Reading
-
Annual Exclusion
-
As of Jan. 1, 2009, the annual exclusion for gift tax is $13,000 per person. This means if you have $130,000, you can give it to 10 individuals and not incur a gift tax.
Exemptions for Gift Tax
-
Gifts such as paying someone's tuition or medical expenses directly to the institution are not subject to the gift tax. Gifts given to charities, religious and education institutions, spouses and political organizations are also not taxable.
-
Gift Splitting
-
If you are married, you and your spouse may split a gift and give up to $26,000 (in 2009) to an individual without incurring the gift tax.
Unified Gift Credit
-
If your gift is subject to the gift tax, you may elect to use the unified gift credit to avoid paying gift taxes. The unified credit allows you to transfer tax-free an amount of your estate. If you elect to use the credit (maxed at $345,800 for 2009), you must deduct the amount of the gift from your credit. This reduces the amount of credit you can use in later years.
Filing a Gift Tax Return
-
Use Form 709 if you are subject to the gift tax.
-
