Question: I would like to make some large cash gifts to my children, while I am alive, rather than by inheritance. What is the limit I can give each year, before paying gift tax?
Answer: You can continue being generous. Assuming you have not given away millions of dollars, thus far – don’t worry about paying gift tax. Here is some good news regarding this often feared tax.
Good News #1: You can give away out to $11.4 million, during your lifetime, without paying a cent of gift tax. If you are married, it doubles to $22.8 million.
Good News #2: In 2020, the limit jumps to $11.58 million for individuals, and $23.16 million for couples. (Let’s hope this becomes a problem for you, in the future.)
Good News #3: The IRS wants to know when you hit your multi-million dollar limit. But, they don’t care about every birthday and Christmas gift you give. You are required to report gifts over $15,000 per year to any single individual. This is only a reporting threshold. No tax is owed, until you hit the multi-million dollar limit.
Good News #4: The federal estate tax goes hand in hand with the gift tax. Astronomical limits before an estate gets taxed.
Good News #5: Massachusetts has no gift tax. This comes in handy, because Massachusetts has a realistic $1 million limit for its estate tax. Estates over $1 million can be reduced below the threshold, by giving large gifts during your life.
Learn more about Priority Law’s estate services.
The article was originally published in the Lowell Sun and for informational purposes only and not to be relied on as legal advice, in any manner.