How to Gift Money to Family Members Tax Free
Though it's nice to help family members in financial need, or anyone else that you might give money to, it can be shocking to discover that gifting money can trigger a gift tax from the IRS. Luckily, there are simple ways to avoid this tax.
Other People Are Reading
Instructions
-
-
1
Familiarize yourself with the law. There is usually a pre-determined amount you are legally allowed in tax-free monetary gifts to a family member every year, although that figure can change. For example, in 2008, the annual limit was $12,000 per individual; in 2009 and 2010 it was $13,000. If you and your spouse are giving a joint gift, this number typically doubles.
-
2
Plan in advance so the total amount that you gift does not exceed the legal limit. Recognize that the IRS tallies up all monetary gifts you make to an individual during the calendar year.
-
-
3
Use the lifetime gift exemption, which provides you one opportunity to give $5 million in tax-free monetary gifts to as many different recipients as you like during your lifetime. This amount will be subject to change depending upon future actions by Congress.
-
4
Understand gift-tax restrictions. There are numerous circumstances that are exempt from the gift tax. For example, you can give your spouse a monetary gift of any value without triggering the gift tax as long as your spouse is a U.S. citizen.
-
1
Tips & Warnings
If there are special circumstances related to your monetary gift, speak to an accountant or tax professional for advice.
There are circumstances aside from offering a monetary gift to a family member that may trigger a gift tax. For example, the government may view the discounted sale of a house or other asset to a family member as a gift; you may have to pay a gift tax if the discount exceeds the annual limit.
References
Resources
- Photo Credit Wouldn'T It Be Nice To Get Money In A Gift? image by thea walstra from Fotolia.com
