Gifting More Than $15,000 To Anyone I Want

In 2018 and 2019, you can give gifts of $15,000 (referred to as the annual gift tax exclusion) or less per calendar year to each of as many individuals as you want without filing a gift tax return.  Unlimited gifts can be made to a spouse without gift tax consequences. The annual Gift Tax exclusion is indexed annually, which means that you can gift larger amounts in your life without Gift Tax concerns.

Gifts over $15,000 are considered taxable gifts and must be reported on an annual gift tax return, Form 709. Though you must file, you do not have to worry about paying the federal Gift Tax because you can offset the tax by using the unified gift and estate tax exemption. Any federal gift tax assessed on your lifetime gifts will be tallied and subtracted from the combined unified gift and estate tax exemption after you die.  The combined unified gift and estate tax exemption for 2019 is $11.4 million. (With the passage of the 2017 Tax Cut and Jobs Act, the basic estate exclusion was doubled for 2018, but the figure did not take into account any inflation adjustment. Under the same Act, the basic exclusion amount in 2026 reverts to the 2017 exclusion amount.)

Case Studies: Gifting More Than $15,000 To Anyone I Want

Case Study 1: The Generous Grandparent

A loving grandparent decides to gift their grandchild $20,000 for their college education. As the gift exceeds the annual gift tax exclusion of $15,000, the grandparent must file a gift tax return (Form 709). However, they can utilize their lifetime unified gift and estate tax exemption to offset any potential tax liability. This case study highlights the importance of understanding the gift tax rules when making significant financial gifts.

Case Study 2: The Charitable Donor

A philanthropist who wishes to support a charitable organization with a generous donation of $50,000. Since this gift exceeds the annual exclusion, they are required to report it on Form 709.

However, the donor can utilize their unified gift and estate tax exemption to offset any potential tax liability. This case study emphasizes the need to be aware of tax implications when making sizable donations to charitable causes.

Case Study 3: The High-Net-Worth Individual

A high-net-worth individual decides to gift $100,000 to a close friend to assist them in starting a new business. As the gift exceeds the annual exclusion, the individual must file a gift tax return.

However, by leveraging their unified gift and estate tax exemption, they can mitigate the potential tax consequences. This case study illustrates how individuals with substantial assets need to navigate the gift tax rules when making significant financial transfers.