How Much Money Can a Grandparent Gift a Grandchild?
When you have grandchildren, it is natural to want to shower them with gifts from time to time. If you give to them regularly, you may be concerned about the tax implications of doing so. Grandparents can only give so much before they have to start paying taxes on the gifts.
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Annual Gifts
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As of the time of publication, you are eligible to give up to $13,000 to each grandchild or $26,000 if you are married. The law allows you to give this to an unlimited number of grandchildren without having to pay any taxes on the gifts. As long as you keep your annual gifts below these levels, you do not have to report anything to the Internal Revenue Service.
Lifetime Limit
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In addition to the annual gift limit, you also have a lifetime gift limit before taxes kick in. If you give more than the $13,000 or $26,000 annual limit, the overage applies to your lifetime limit. As of the time of publication, your lifetime gift limit is $5 million. This means that you could theoretically give up to $5,026,000 in a year before you would have to pay any gift taxes on the money.
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Estate Taxes
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Gifts to your grandchildren can also affect your estate tax situation. As of the time of publication, your estate will have to pay estate taxes if it is larger than $5 million when you die. This means that if you have a sizable estate, giving part of it away to your grandchildren on a regular basis can potentially get your estate under the estate tax exemption. This can help your grandchildren and your other beneficiaries by avoiding estate taxes.
Considerations
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If you are interested in helping your grandchildren, you do not simply have to give them cash. While cash can be very helpful, you have other options. For example, you could set aside money in a college savings plan to help pay for their higher education. When putting money into this type of plan, the gift tax rules still apply. Helping with a down payment on a house or by paying medical bills are some other options.
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