Gift Tax/Kiplinger Article

[marko]

Thought I'd run this by our esteemed group here in case I'm missing something.

This month's Kiplinger's has an article on "Smooth Year End Money Moves", highlighting "Trim your tax bill".

It lists things such as being aware of surprise cap gains from MFs, identify your deductible expenses, contributing to a 529 etc but also says "Make Gifts".

I must be missing something--I often am. My take is that unless a couple has plans for over $24.12 million to give away, there is no direct tax savings by making gifts.

Yes, I'm aware of the intricacies of the $16K/$32K reporting issue and the chance the Congress might drop the $12MM/$24MM exclusion to $6MM, but unless one is in that range, how does making a gift now save anything on taxes today? Even with much lower levels at the state level, doesn't all of that only become an issue at estate time?

Or am I missing something?

[braumeister]

Quote:

Originally Posted by marko also says "Make Gifts".

What does the article say about that?

[athena53]

Is it possible they meant charitable gifts or is that discussed separately? Heck, I get enough e-mail and snail mail from every place I've ever donated this time of year to remind me to "make gifts".

[marko]

Quote:

Originally Posted by braumeister What does the article say about that?

It just goes into the details of how much you can give away before needing to file a gift Tax return, what the exclusion is and how Congress might lower that exclusion, how State gift taxes are different, etc. It also lists the obvious, like charitable giving and covering a dependent's medical/college tuition costs.

"...in order for he the gift to count towards the 2022 exemption you must give away the money before December 31..."

Ok, but few are in the $24MM range for that to be a concern and States with lower exemptions have different rules anyway. Again, isn't all of that more of a concern at estate time?

[TripleLindy]

We helped our kids buy houses over the past 2 years and had to file gift tax forms. Even with 6 figure gifts, there was no impact on taxes, positive or negative. As an aside, the gift tax form has to be one of the most complicated forms to file. It’s absolutely insane.

[marko]

Quote:

Originally Posted by TripleLindy We helped our kids buy houses over the past 2 years and had to file gift tax forms. Even with 6 figure gifts, there was no impact on taxes, positive or negative.

That has been my understanding. I'd expect those who would be impacted (over $24MM in giving) don't rely upon Kiplinger's for tax advice.

[Car-Guy]

Quote:

Originally Posted by TripleLindy We helped our kids buy houses over the past 2 years and had to file gift tax forms. Even with 6 figure gifts, there was no impact on taxes, positive or negative. As an aside, the gift tax form has to be one of the most complicated forms to file. It’s absolutely insane.

+1 Did the same thing. Bought the DD a new house and paid for it in cash last year. Had to file the "stupid" paper work but it's was so intimidating/complicated that I took some liberties and made it simple and only filled out what I thought was relevant. So far, no questions have been asked.

IMO, form 709 was designed/intended for really rich folks and not us lowly multi-millionaires.

[pb4uski]

I don't see this trimming your income tax bill at all so perhaps it is just mischaracterized, but here is the clip that marko is referring to:

[audreyh1]

Isn’t it just reminding people that if they have gifts to make to anyone, here is how much you can give this year without filing a gift tax return?

No, not tax saving this year, just paperwork and record keeping savings, and it might help save taxes in the long run because those annual gifts up to the exemption aren’t counted against your estate at all.

[Sunset]

If you live in a State that taxes inheritances of $1 Million , giving away some $$ now will/could save taxes for many folks, especially as their house probably counts in the estate valuation.

Only other way I can see it saving taxes is, If I give away $32K per year, then that money doesn't earn me interest/dividends the next year, of ~ $1,600 so taxes saved might be ~$352 at the 22% marginal tax rate for every gift.

[pb4uski]

^^^^ If you give away all your money then you would have no interest or dividend income and your tax bill would be much, much lower.

If there are forum members interested in this tax-saving tactic, PM me and I'll be happy to help.

[marko]

Quote:

Originally Posted by audreyh1 Isn’t it just reminding people that if they have gifts to make to anyone, here is how much you can give this year without filing a gift tax return? No, not tax saving this year, just paperwork and record keeping savings, and it might help save taxes in the long run because those annual gifts up to the exemption aren’t counted against your estate at all.

Agreed. But the article was about prepping for tax season, so I think it was a misplaced strategy

[marko]

Quote:

Originally Posted by Sunset If you live in a State that taxes inheritances of $1 Million , giving away some $$ now will/could save taxes for many folks, especially as their house probably counts in the estate valuation.

But that would be at one's death.

My grandfather was very, very wealthy, but "gift" was a four letter word to him.

The idea of giving his money away in order to save us taxes was a concept so out of his reasoning that it was never even considered a subject to broach.
"You'll get my money when I’m dead! Not a minute before!" was implied but never spoken.

It has been so ingrained in our family that that mentality has transferred down to me for better or worse.

[Car-Guy]

^^^^^
That was my dads perspective too but the logic didn't transfer very well to me... I often wonder if my gifting has maybe been to big of a crutch for my DD.

[audreyh1]

Quote:

Originally Posted by marko Agreed. But the article was about prepping for tax season, so I think it was a misplaced strategy

Perhaps, but I think it is typically included as a reminder in articles discussing end of year tax planning simply because there is a deadline.

[Dash man]

Here in PA there is a inheritance tax on everything over about $3,000, so we are gifting some each year. If our estate continues to grow we may also be affected by the upcoming 2026 reversion of the estate tax law, though at the moment it’s not an issue.

[Piper20]

There is no gift tax in PA. There is an inheritance tax.

[Dash man]

Quote:

Originally Posted by Piper20 There is no gift tax in PA. There is an inheritance tax.

Thanks, I know that and have no idea why I typed “gift.”