17K Gifting Limit

[Badger]

I don't like anything that would potentially raise a red flag with the IRS. Even though it may not be an issue when the gift is one check from the both of you could still write two checks from the same account (one signed by you and one signed by your spouse). It doesn't take more than an extra minute and the cost of an additional check shouldn't be a deal breaker if you can afford a gift of that magnitude. So why not?

Cheers!

 

[Alan]

Are you suggesting that I can gift any amount I want (subject to the lifetime limit) with no tax implications to me?

Correct. The $17k mentioned above is just a reporting threshold. Anything above that must be reported but no tax is due until you exceed the lifetime gift allowance of several million.

 

[audreyh1]

I was under the impression that gifting over $17K (per person) in any one calendar year would result in taxes being paid that year by the person giving the money. So, if I give my niece $40K, and I'm not married, then I pay taxes on $40K-$17K, or $23K. If I'm married, I can give $17K, wife can give $17K, and we only pay taxes on $6K.

Are you suggesting that I can gift any amount I want (subject to the lifetime limit) with no tax implications to me?

No, it doesn’t work that way at all. No taxes are paid unless you’ve exceeded your lifetime estate tax exemption. So generally, it’s purely record keeping.

If you give $40K, you file form 709 and $23K is taken off your estate tax exemption. Each year you file a form 709, your estate tax exemption would be reduced farther by the amount exceeding that year’s annual limit. So it is cumulative and you need to reference the prior form 709 whenever you file another one.

If you and your spouse give $40K, each of you files form 709 and $3K is taken off each of your lifetime estate tax exemptions. Each of you has to agree on the forms that it was a shared gift.

 

[Car-Guy]

I was under the impression that gifting over $17K (per person) in any one calendar year would result in taxes being paid that year by the person giving the money. So, if I give my niece $40K, and I'm not married, then I pay taxes on $40K-$17K, or $23K. If I'm married, I can give $17K, wife can give $17K, and we only pay taxes on $6K.

Are you suggesting that I can gift any amount I want (subject to the lifetime limit) with no tax implications to me?

What Alan and Audreyh1 said in the above few posts is correct from my understanding and it is how I've handled mine in the past. Just file form 709 whenever you exceed the annual exclusion limits. (Currently 17k) If you are really rich (and not a lowly <10 millionaire like many of us) your tax attorney (which you will probably have at that point) should let you know when you hit the lifetime exclusion limit and need to start paying tax on your gifts.

 

[marko]

Correct. The $17k mentioned above is just a reporting threshold. Anything above that must be reported but no tax is due until you exceed the lifetime gift allowance of several million.

+1 This is one of the most misunderstood items in the tax code. I've had so many (almost contentious) discussions with friends who believe that they are limited on how much they can give.

An uncle gifted me mid-six figures one year (for his own benefit) and there was no issue.

 

[Car-Guy]

+1 This is one of the most misunderstood items in the tax code. I've had so many (almost contentious) discussions with friends who believe that they are limited on how much they can give.

An uncle gifted me mid-six figures one year (for his own benefit) and there was no issue.

Let your uncle know I'd be happy to receive one of his mid 6 figure gifts "if it really helps him out".

 

[marko]

Let your uncle know I'd be happy to receive one of his mid 6 figure gifts "if it really helps him out".

Sorry, too late. The old man died exactly 10 years ago today! I had no real access to the money anyway (he maintained control) but now that's moot. In fact I'm trying to remember why he did that.

"Gift" is the IRS' definition. In our family it's a four letter word.

 

[aaronc879]

I don't do two "checks". The money comes from our joint bank account so I figure it is obvious if I am ever approached on this. (We give our kids $30k/year via bank transfer)

Are you looking to adopt? lol

 

[Unpaintedhuffhines]

+1 This is one of the most misunderstood items in the tax code. I've had so many (almost contentious) discussions with friends who believe that they are limited on how much they can give.

An uncle gifted me mid-six figures one year (for his own benefit) and there was no issue.

wow. Honestly, I must have completely misunderstood this, and I can guarantee that my in-laws misunderstand it. This is significant as I want to gift some $ to my kiddos who are looking to buy a house (way over $17K), but I was worried about immediately paying taxes on the amount over $17K. Thanks to all who corrected me.

 

[Alan]

Are you looking to adopt? lol

Thanks for the offer but we have enough kids for now

 

[ERD50]

Just a note to those figuring they don't need to file a Form 709 because they are well below the current, or even the 'sunset' level of the Estate Tax threshold - those thresholds can (and have) changed.

I'm not predicting that will happen, but I would not want my heirs to be surprised years later if the IRS found out somehow.

And yes, I know, the odds of the IRS digging into this or a 'joint' gift are very close to zero, I'm not disagreeing with that at all. But the effort to avoid any problem at all is also near zero, so I would just do it.

-ERD50

 

[audreyh1]

Just a note to those figuring they don't need to file a Form 709 because they are well below the current, or even the 'sunset' level of the Estate Tax threshold - those thresholds can (and have) changed.

I'm not predicting that will happen, but I would not want my heirs to be surprised years later if the IRS found out somehow.

And yes, I know, the odds of the IRS digging into this or a 'joint' gift are very close to zero, I'm not disagreeing with that at all. But the effort to avoid any problem at all is also near zero, so I would just do it.

-ERD50

What? We are talking about the annual gift tax exemption determining whether or not to file form 709 on a year by year basis, not the lifetime estate tax exemption determining whether or not to file form 709. No one has claimed the latter.

 

[ERD50]

What? We are talking about the annual gift tax exemption determining whether or not to file form 709 on a year by year basis, not the lifetime estate tax exemption determining whether or not to file form 709. No one has claimed the latter.

Yes, I think this next post was in reference to that. I'd have to look back through the whole thread, but I think someone mentioned why bother if your estate will be less than the lifetime exclusion.

Just to be clear for folks unfamiliar with this, there is no gifting "limit." The $17K is a reporting threshold and, if you have a large enough estate, will cause the reported gift to be included in the total estate value for estate tax purposes. For most of us, that is not an issue so the reporting threshold just creates a time-wasting task.

Also, in the real world what is the likelihood that the IRS will slog back through years of records looking for gifts that exceed the threshold but no form was filed? My guess is zero chance.

-ERD50

 

[audreyh1]

I see, thanks for clarifying which post, etc.

 

[MarieIG]

I don't like anything that would potentially raise a red flag with the IRS. Even though it may not be an issue when the gift is one check from the both of you could still write two checks from the same account (one signed by you and one signed by your spouse). It doesn't take more than an extra minute and the cost of an additional check shouldn't be a deal breaker if you can afford a gift of that magnitude. So why not?

Cheers!

Ditto.

 

[Koolau]

If it were me I would avoid filing a form 709 if it is not needed. A gift above the limit adds to the lifetime limit which is figured into the estate tax and the form 709 allows tracking of the gifts. Gifts under the $17K limit are not tracked for estate tax purposes. I think using the memo line on the check stating it is from the both of you should suffice.

A few years back, CPA said gifting was a non-event if it didn't exceed the statutory limit for reporting. Took his word for it and never heard from the IRS. Of course, with all the extra agents on board now, who knows.

In any case, YMMV so check it carefully.