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Gift Tax Advice

‘Tis the season of giving and we are pretty sure many of you are thinking about giving monetary gifts to family and friends for the holidays!

Below we outline the most common tax treatments of these kinds of gifts and ways to mitigate excessive gift-tax.

Gift-Tax Explained

For 2020, the IRS allows all individuals to give monetary gifts, in the amount of $15,000 to family and friends tax-free. This includes cash, stocks and other personal properties like cars, jewelry and antiques. You may also give a $15,000 gift to as many people as you want, this too will be completely tax-free! If you choose to give a gift in excess of $15,000 you must file a gift-tax return and pay the tax-liability. Also note that, for every gift tax filed, you will reduce the gift-tax exemption applied to your estate.

Ways to Mitigate Gift-Tax

  1. Try not to exceed the $15,000 gift tax exemption limit for any one person.

  2. If you feel generous and would like to give a gift exceeding $15,000 to a single person, consider gift-splitting with your spouse. This way you may give a gift of up to $30,000 to the same person tax-free!

  3. Consider paying off medical bills or college tuition for your family or friend instead of giving them cash. Any payments made directly to the hospital, doctor’s office or college, is exempt from gift tax. And guess what? Your gift may exceed $15,000 without having to gift split with your spouse!

  4. Keep in mind that day-to-day expenses like rent, car-note, and utilities paid directly to a landlord or service provider is not exempt from gift-tax. If you exceed the $15,000 limit covering these expenses for your loved-one, it is taxable to you.

We know it feels great giving gifts! Just keep in mind your tax obligation and future tax consequences as you spread joy, cheer and happiness through cash or kind!

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