If you are in a position to make large gifts of money, property, or other assets, it’s important to be well versed in what the gift tax is and how it works. Read on for more details.
Gift Tax Definition
The name “gift tax” is actually pretty self-explanatory. It’s a tax assessed by the IRS if you give someone something for nothing. The giver is responsible for this tax.
Good News for Gift Givers
The good news is that you would have to give someone a really big gift to trigger any gift tax paperwork. Annually, the IRS allows you to give another person gifts up to $15,000 without being flagged regarding the gift tax. You can even give $15,000 (or items of that value) to several different people, and you still won’t need to worry about the gift tax.
If you do give $15,000+ in gifts, you probably still won’t have to pay gift tax. That’s due to the $11.2 million lifetime exclusion rule. Even if you give someone major gifts every year, you won’t have to pay gift tax until you go over the lifetime exclusion limit. You do have to file a gift tax return for gifts over $15,000 so that the IRS can keep track of how much you’re giving away, but, in most cases, you won’t have to pay any tax until you go over the $11.2 million mark.
If you’re unsure about where a particular scenario in your life lands when it comes to gift tax, contact your local tax experts at Taxation Solutions, Inc. We’re on-call to assist residents in Arlington and the surrounding area to navigate the gift tax and make informed decisions regarding giving and receiving sizable gifts. Call us today!