Two things you didn't tell your viewers that are important: 1. Gifts over $16,000 for tuition or medical expenses must be paid DIRECTLY to the provider of the education/medical care. You can't give the tuition/medical expense money to the gift recipient directly and tell them to use it to pay tuition or medical expenses. 2. Couples gifting $32,000 to one person need to write TWO checks for $16,000 each or they will have to file Form 709 for gift splitting. At least that's my understanding of the regulations.
I wish the instruction sheets for form 709 were a little clearer. After filling in lines 1 thru 6 on "Part 2" on the first page of form 709 regarding a gift of more than $16k, one has to focus on Line 7 of "Part 2". Please read pg. 20 of the instructions sheets for form 709 - most filers will write $4,769.800 on Line 7 which is the Applicable Credit amount for the Applicable Exclusion amount of $12,060.000. If a person has used form 709 in former years then lines 2, 5, & 8 must also be filled in. The amounts I have just cited will be different when filing taxes for 2023.
Often gifts under the annual exclusion given to children to secure a loan for a home purchase will require signing a form from the bank that states there is no expectation of repayment or that the gift was a loan. In addition, gifts should be separated so the $32,000 gift in your example should be two gifts of $16,000 from each individual spouse as the IRS could misconstrue the larger gift as coming from an “individual” as stated in the tax code. Same with gift’s from trusts..
I am in a situation this year where I am being gifted a large sum of cash from my mother. This wasn’t a transaction or business on my part. She sold real estate in a foreign land and now wants to gift me back a percentage for helping her out back in October 2020. To my understanding of this video and the IRS gifting language, I can go to my bank and deposit $16k in cash and claim it as a gift. I was hesitant because I know the irs wants to report any transactions over $10k but this isn’t a transaction on my part.
Any years we exceed annual yearly gift tax exempt amount, we just only need to fill IRS Form 709, do not need to do anything else to let IRS know we would like it to be deduced from life time exclusion amount and do not worry about paying gift tax as long as we did not exceed life time estate exclusion amount which I guess is $12.92 million in 2023. Is my understanding correct?
Yes, you are correct. Tax form 709 is filed to keep track toward your 12.92 M. Filing tax form does not mean you have to pay tax. Most people will not ever worry about gifting going over 16-17 K /year unless you are really rich.
One important thing to consider about gifting early is the amount of capital gains to be paid by in selling or transferring the gifted assets. Sometimes it is better to take the 40% estate tax hit on long-term investments because the step up in basis upon death transfer will be more tax advantageous.
How does the IRS know if someone gives their kid 100K and don't file? Seems to me it's difficult to track since recipient doesn't report getting the money. Especially if they don't bank it.
Is the only exclusion for medical and college/school where you pay directly? What if someone pays off your debt directly to the credit card company and loan company. Would that count as well as something not going towards the yearly gift amount? Or would that still be considered a gift?
Another plus with gifting would be is funding families Roth IRAs, for children and grandchildren which would grow tax free. I good way to get back the stretch IRA that we lost in the Secure Act.
What about this Child is US citizen going to school in the US One of the parents is a non citizen that has no tax liability to the USA and never been there Non US citizen parent has an estate outside of the USA that has no ties or obligation tax wise to the USA but wants to gift the child an amount over the $16000? Since they have no ties to, or obligation to the IRS in the USA how would that be treated? Thanks
Great information. For spouses, if the want to gift 32,000 can they do it in one lump sum or should it be separated into two payments of 16,000 per spouse?
My spouse and I wrote two separate checks (i.e., for $16,000 each) to our son, one check signed by me, the other by my spouse. Even though it came from the same joint checking account, my understanding is we don't have to file form 709 for marital gift splitting. I will have the two separate checks from two different individuals to present to the IRS if audited.
So, mom gifts $15k in cash, actual cash bills. Child deposits the cash. The bank makes a report of the large cash deposit and another alphabet agency want to know whom the gift was from. Is the child required to offer up a name?
If I add my best friend in my second hand car title along with my name, as joint tenants with right of survivorship, is this considered a gift? If so If full car costs around 17000$, then 17000$ is gift amount? Or 17000$/2 is gift amount?
If one makes a revocable trust within which 20000$ is designated to be gifted a person, Does the Trustee file a form 709 with the irs the year the trust is created as donor of the planned gift?
If I exceed the annual limit this year by 7M, and file form 709 (leaving roughly 10M future exclusion from the 16.92M current limit)... and the unified credit is later reduced back to roughly 7M in 2026..... do I maintain a 7M future exclusion (as I had 10M remaining, but capped at 7M)....**OR** does the gift of today totally eliminate my unified credit since I had used 7M prior to the exclusion reduction?
If I'm understanding your question correctly, its in relation to the exemption we expect to cut in half in 2026? Right now its around $13M (w/ rounding) for a single filer and will cut in half in 2026. The amount you use right now over the future exemption will be 'saved'. For instance, say you gifted $10M, you would be able to use the current exemption amount but have no remaining exemption left after 2025.
@@SafeguardWealthManagement I checked out your website and it's mainly focused on financial planning/advising. Do you offer tax planning services separate from financial planning?
gift limit ?? what barbarian country is that ?? anybody has the basic right to give any of their property to another person especially family members or even friends or even unknown people, anybody can also receive any gift from anybody and is a very natural thing, if there is a country which takes this basic human right away, I would say this country is really going back to the stone age or ruled by barbarians.
