By: Terry Bennett
Many parents and grandparents give their children and grandchildren gifts during the year. They may give them money for a down payment on a home, to buy a car or help them out in other ways. But when are these gifts of taxable importance? The attorneys at Skeeters, Bennett, Wilson & Humphrey want to make sure you know the specifics of gift taxes.
For 2017, an individual can give gross gifts of $14,000 or less to anyone with no tax effect. There are no reporting requirements nor do you have to file a gift tax return. If your spouse joins in the gift, then the available deduction increases to $28,000.00.
Spouses can give an unlimited amount of money to each other under the gift tax marital deduction rules, and there are no gift tax forms to be filed or any gift tax to be paid. To be eligible for the 100 percent marital deduction concerning gifts, the spouse must be a U.S. citizen.
If a gift or the aggregate of gifts in any one-year is more than $14,000 to anyone other than a spouse, then a gift tax return must be filed. An individual’s lifetime exclusion is $5 million. Therefore, an individual can give a gift or gifts of up to $5 million during a lifetime and never have to pay gift tax. For an individual and a spouse, the amount is doubled to $10 million. The federal gift tax rates are the same as the federal estate tax rates. The rates start at 18 percent for any taxable gift between $10,000 and $20,000 and goes to the highest taxable rate, which is 40 percent, on $1 million or greater. But there is a $2,045,800 gift tax credit, which shelters $5,250,000 of taxable gifts in excess of the annual exclusion amounts.
Payments of medical expenses and tuition payments are excluded from the federal gift tax requirements. Contributors to a qualified tuition program that exceed $14,000 may treat the gift as if it had been made over a five-year period; in effect, allowing a $70,000 exclusion in any one year.
Any gift deductible for income tax purposes is deductible for gift tax purposes and does not count towards the $14,000 annual gift tax exclusion. The gift tax charitable deduction is unlimited. The gift tax charitable deduction is not limited to domestic organizations or to gifts for use within the United States.
Terry joined the practice in 1974. His areas of focus include personal injury law, real estate law, probate law, estate planning, business law, corporations, and adoptions. He is admitted to practice before the United States Supreme Court, United States Court of Appeals 6th Circuit, United States District Court Western District of Kentucky, United States Court of Military Appeals, and all Kentucky courts.
A Hardin County native and former Army office in the Judge Advocate General (JAG) Corps, Terry graduated from William and Mary in Virginia with an undergraduate degree in government. He received his Juris Doctorate from Wake Forest Law School in Winston Salem, North Carolina, where he graduated with honors.