Gift Tax Exclusion – What Does It Mean?
There are two freeways to make gifts without incurring gift taxes.
The first one is the annual exclusion on the second one is your lifetime exclusion. It’s 2017 so you can gift $14,000 this year to as many people as you want using the annual exclusion. Plus, you can gift your full lifetime gift exemption amount which currently is over $5 million.
Here is an explanation of how gift taxes can be avoided.
You want to give $50,000 to each of your four kids without paying gift taxes. If you are not married then the first $14,000 that you give to each of them uses your annual exclusion. The other $36,000 will come out of your lifetime exclusion. At the end of the day, you have made gifts of $200,000 and you (and your kids) have paid zero dollars in gift tax. There are other tax consequences to making gifts that you may want to consider, you can call our office at 480-418-8448 for answers to additional questions.
Every time you use some of your lifetime gift exclusion, that amount is also taken off your estate tax exemption amount. Think of it this way. You can use your gift taxes coupon or your estate tax coupon, or some combination of the two, but not both. This is the reason why using your annual exclusion can be so powerful. Your annual exclusion can be used so that you do not use up your lifetime gift exclusion nor your estate tax exemption. And when you put together a gifting program, that we can help you design that will continue over the years, you can reduce the size of your estate significantly without incurring any gift tax or estate tax.
If you’d like to put together a strategy on gifting to reduce the size of your stay, please call our office. We offer services for clients throughout Arizona, including Chandler, Gilbert, Sun Lakes, Tempe, Phoenix, Mesa, Scottsdale, and Apache Junction.