The IRS allows individuals to give away a specific amount of assets each year, gift tax-free. The annual gift tax exclusion for 2023 is $17,000. This increase is a result of rising inflation.
Here are a handful of common questions and answers to help you understand the ins and outs of the annual gift tax exclusion.
Yes. The gift tax exclusion amount is limited per recipient. You can gift $17,000 to as many people as you’d like tax-free.
Not only do you not pay gift or income tax, but the recipient doesn’t pay any gift or income tax either.
Yes, you and your spouse can gift to the same recipient, allowing you to give up to $34,000 to each recipient.
Beyond the annual gift exclusion amount, the IRS allows US citizens to give away up to $12.92 million in assets over their lifetime. If a gift exceeds the annual exclusion limit, the excess gets deducted from the person’s lifetime exemption amount.
When you give money directly to a charity, an educational institution for tuition, a medical provider, a political group, or your spouse, the gift limit does not apply. Be better prepared and start planning with Brickley.
Yes, and similar rules apply, but income tax considerations need to be reviewed prior to the gift.
A woman decides to buy her niece a $30,000 car as a college graduation present. This would technically exceed the annual $17,000 exclusion limit by $13,000. She wouldn’t owe additional taxes on it because she reports the gift to the IRS and deducts $13,000 from her $12.92 million lifetime exemption. Brickley or your other CPA prepares the necessary IRS form.
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