How Does the Gift Tax Exclusion Work?
The gift tax exclusion allows you to give a certain amount of money annually to each person you wish to gift money to without tax consequences. If you exceed the allowable exclusion amount, you must claim it as part of your income tax reporting. For individuals with substantial estates, the gift tax exclusion allows them to give money to their heirs annually to avoid taxation. This is a huge tax break for wealthy people. It can also help people who have children in college that they wish to support or assist. By avoiding tax on the gift amount, as long as it does not exceed the annual maximum, you can save thousands of dollars in taxes.
Gift Tax Explained
The annual exclusion amount for gift tax applies to gifts to each person a gift is given to. You can give the gift to many people on an annual basis without tax consequences. As of 2009, the annual exclusion amount was $13,000, which means that each gift can be up to $13,000.
The normal tax rule is that any gift is taxable. There are several exceptions to this rule. The following gifts are not usually taxable gift:
that are not more than the annual exclusion for the calendar year.
- Tuition or medical expenses you pay for someone else.
- Gifts to your spouse.
- Gifts to a political organization for its use.
- Gifts made to charities are usually tax deductible.
- Other exclusions may also apply, so consult an experienced tax lawyer to find out about which gifts you can avoid tax on.
If you are married and you give a gift as a couple, you can double the annual exclusion amount for each gift.
Generally, you do not need to file a separate gift tax return unless you exceed the tax exclusion amount. Future interests in property may also invoke the need to file a separate tax return.
Getting Legal Help
If you need help understanding the gift tax exclusion,or other tax benefits, an experienced tax law specialist can help you handle your financial affairs. An attorney who is skilled at estate planning can assist you with this and many other concerns. Many times, people do not realize the extent of the laws that can help them come tax time. An attorney can save you money as well as help you comply with the law.Source: www.taxationlawfirms.com