How much gift tax free
For 2014, IRS Raises Lifetime Tax-Free Gift Limit, Not Yearly Limit
Families weighing the tax implications of monetary gifts should be aware that the yearly limit on how much a person can give to another person without paying a gift tax or raising a portion of that donor’s gift tax credit will not increase for 2014. In 2013, the IRS raised this limit, known as the annual gift exclusion, to $14,000 from $13,000.
This number can be doubled by married couples, who can combine their annual exclusions and thus give a sizeable annual cash gift with no tax liability or use this credit. For instance, a couple with one adult child who is married with one child could give $28,000 to their son/daughter, $28,000 to the child’s spouse and $28,000 to their grandchild.
What happens if you exceed those limits? If you do, the gift would go toward reducing your lifetime gift exclusion of $5.34 million, which the IRS raised for 2014 from $5.25 million this year. Once a person’s lifetime exclusion is exceeded, a gift tax of up to 40 percent will apply to you or your heirs.
“While the generosity with family members often occurs under the radar, the law is
clear,” writes Forbes columnist Deborah L. Jacobs. “If the gift exceeds a certain value and the Internal Revenue Service catches it, you could be forced to pay the tax as well as the interest, and in some cases, penalties.”
Your estate planning attorney can work with you to create a plan that will best use your annual exclusions. One possibility beyond simply giving cash or assets each year is to set up Section 529 educational savings plans. Section 529 plans allow you to gift funds that are allowed to grow tax-free and can be withdrawn tax-free, if the funds are used for educational purposes.
For additional information on how to best navigate gifting issues as a part of your personal estate plan, contact George M. Riter, Esq. managing partner at Timoney Knox LLP. Mr.Riter’spractice of trust, estate and corporate law focuses on the estate planning needs of individuals, families, business owners, individuals with special needs and non-profit entities and foundations.
IRS Raises Yearly Limit for Tax-Free Gifts, Forbes. 10/31/2013, by Deborah L. Jacobs
IRS Raises Limit on Tax-Free Lifetime Gifts, Forbes. 10/31/2013, by Deborah L. Jacobs
Higher Limits for Estate Tax Credits in 2014, Moneywatch. 9/23/2013, by Ray MartinSource: www.timoneyknox.com