Gift-giving and Taxes

The recipient of a gift need not worry about the tax consequences; receipts of gifts are non-taxable events.  However, that is not always the case for the giver.  Every year the IRS allows for the tax-free transfer of a specified amount of monetary gifts. For 2017 this amount stands at $14,000 per person, per year.  Amounts given to any one individual, by any one individual, during a tax yearbring about no consequences as long as they are at or below $14,000.  For example, a husband and wife can each give $14,000 in cash ($28,000 total) to each of their grand-kids every year, with no resulting tax or return filing consequences. 

Gifts in excess of this annual exclusion can also be tax-free; however, these gifts are required to be reported against the givers lifetime gift and estate exemption.  The total lifetime exemption for 2017 stands at $5.49 million per individual.  Gifts made during the year in excess of the annual exclusion ($14,000) require the giver to file a gift tax return.  This return discloses the excess gifts given annually as well as tracking their lifetime excess/remaining exclusion.  Typically annual gift returns come with no tax due; however, these returns reduce the tax-free amount allowed upon death and could have potential tax consequences down the road.

Bottom line?  If you have a large estate and make any large gifts during the year, consult your tax advisor.  We may be able to offer advice on how to better structure these transactions. 

- Courtney Elgin, CPA

Categories: Audit & Accounting, Other Resources