What you need to know about gifting money

Did you know that you can give money away to loved ones every year without you—and, in most cases, your beneficiaries—having to pay taxes on the gift? 

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You can give up to $15,000 a year to individual family members and friends without reporting it on your taxes. That’s $15,000 to each recipient: children, grandchildren, nieces, nephews, siblings; as many as you want. You can do it again the next year, and for many years after.

What’s more, if you are married and you and your spouse file your taxes jointly, you can double those amounts, gifting $30,000 annually.

Of course, there are some caveats. 

  • Want to give more? If you give more than $15,000 (or $30,000 if you’re married) in cash or other assets (such as a car or stocks) to one person in the course of a year, you’ll have to file IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, to disclose the gift.
  • Use it or lose it. You can’t apply funds you give this year to last year. If you don’t give this year, you’ll have to wait until next year.
  • There is a limit. You’ve got a total lifetime exclusion of $11.58 million (which rises to $11.7 million in 2021). If you are married and file jointly, you can double that amount.
  • Gifts can be made only to people, not charities. The gift tax exclusion is meant for gifts only, not charitable donations to nonprofit organizations.
  • Rules don’t apply to spouses. You can gift any amount to your spouse at any time without worrying about IRS Form 709. 

The chance to make a difference

Think about the impact of those gifts. For example, what if you contributed $15,000 to a newborn grandchild’s 529 plan account? Over 18 years, it could grow to more than $52,000. And if the grandchild uses those funds for qualified educational expenses, they can be withdrawn tax free.

The growth of $15,0001

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What’s more, you can make five years’ worth of contributions to a 529 account in a single year—up to $75,000 ($150,000 for married couples filing jointly) per child or grandchild—without triggering federal gift taxes.

While the holiday season is a great time to think about giving, these gifts can be made at any time of the year. When thinking about gifting, be sure to consult with your tax, estate planning, and/or financial professional. They can help you devise a plan that meets your needs.