{"id":10044,"date":"2023-11-21T12:05:00","date_gmt":"2023-11-21T20:05:00","guid":{"rendered":"https:\/\/www.soundcu.com\/?p=10044"},"modified":"2024-09-16T10:41:45","modified_gmt":"2024-09-16T17:41:45","slug":"the-ins-and-outs-of-giving-a-gift-of-money","status":"publish","type":"post","link":"https:\/\/www.soundcu.com\/blog\/the-ins-and-outs-of-giving-a-gift-of-money\/","title":{"rendered":"The Ins And Outs Of Giving A Gift Of Money"},"content":{"rendered":"
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The Ins And Outs Of Giving A Gift Of Money<\/strong><\/h2>\n

While exchanging presents at the holidays or gift cards on birthdays is always special, sometimes people have the ability to give more in the form of a monetary gift. Not a $20 tucked in a birthday card, but the bigger sums the IRS categorizes as a \u201cfinancial gift.\u201d These gifts can be incredible, even life-changing.\u00a0 Perhaps a friend or family member has a windfall that they want to share, or maybe a grandparent wants to help a grandchild purchase a first home. If you\u2019re in a position to either give or receive a financial gift, lucky you! But you\u2019ll need to make certain you know the rules before you write a check or have money transferred. Here\u2019s a breakdown.<\/p>\n

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What Is A Financial Gift? <\/strong><\/h3>\n

According to the IRS, a gift is \u201cany transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.\u201d It\u2019s a monetary gift that is given freely, it isn\u2019t payment for <\/em>something else, and it\u2019s money that never has to be paid back.<\/p>\n

But there are limits on how much you can give without involving Uncle Sam. As much as we might wish you and your BFF could slip each other millions (like George Clooney did that one time<\/a>) without ever having to say a thing, there are taxes to consider.<\/p>\n

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How Much Money Can You Give Or Receive Without Having To Worry About Taxes? <\/strong><\/h3>\n

For starters, anyone who receives a cash gift doesn\u2019t have to worry about taxes \u2014 taxes are paid by the giver. In 2023, any single person can give another single person up to $17,000 during the year without tax implications. This figure is known as the gift tax \u201cexclusion\u201d amount, and it often changes every year based on inflation, changes to the tax code or various other factors.<\/p>\n

But keep in mind that $17,000 is the maximum a single<\/em> person can give without tax implications \u2014 married couples can combine their resources to give much more. If you are married, you can give up to $34,000 to an individual. This is because one half of the couple can give $17,000 to a person, and the other half of the couple can give $17,000 to the person. For example, in a situation where a mom and dad wanted to give a generous financial gift to their daughter, son-in-law, and granddaughter, the maximum amount that could be given to that family without tax implications would go up to $102,000. That\u2019s because the mom could give $17,000 three times: once to her daughter, once to her son-in-law and once to granddaughter ($51,000) and the dad could also give $17,000 three times to his daughter, son-in-law and granddaughter ($51,000) for a total of $102,000.<\/p>\n

What if you want or need to give a gift that\u2019s over the annual tax exclusion? Unless we\u2019re talking millions and millions, there aren\u2019t going to be taxes owed, but you do have to file an additional form with your taxes (IRS form 709). On this form, you\u2019ll disclose exactly how much you gave, per recipient and file it when you file your taxes.\u00a0 In addition to being able to gift the $17,000 annually, each individual person has what\u2019s called a \u201clifetime gift exemption.\u201d This is the amount the government allows you to give away during your life or as part of your estate at death before estate taxes kick in.<\/p>\n

In 2023, this amount stands at almost $13 million. Go over that amount and, yes, the giver will owe taxes ranging from 18% to 40%. Note: The current lifetime gift exemption is so high because it was doubled with the passage of the 2017 Tax Cuts and Jobs Act. Many of the provisions of that law are set to expire in the next few years, including this one. In 2026, if Congress doesn\u2019t act to repeal it, it will fall to about $7 million per individual. Simultaneously, the highest tax rates on estates\/gifts will rise to 45%.<\/p>\n

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Are There Any Exceptions To These Rules? <\/strong><\/h3>\n

When we\u2019re talking about traditional cash gifts, no. The exception to this would be if the gift is an asset that produces income as opposed to just cash. In other words, when something like an apartment building or a stock portfolio is gifted, then the giver AND the recipient will need to file IRS Form 709. This still doesn\u2019t mean taxes will be owed, and again, those taxes are usually paid by the giver. It\u2019s only in rare cases that the gift receiver<\/em> owes money. Your tax preparer can tell you more, based on your unique situation.<\/p>\n

There are some other monetary gifts that are never taxed, no matter the amount given including gifts to your spouse (at death, one spouse can pass an estate of any size to another) or gifts to a political organization or a qualifying charity. Additionally, if you\u2019d like to help someone out with tuition or medical bills, those gifts are also never taxed as long as you directly pay the institution or medical facility itself rather than just writing a check to the recipient.<\/p>\n

Lastly, if you\u2019re planning to give an asset like a car or a property, know that it\u2019s also taxable as a gift, and the $17,000 exclusions still apply. Per the IRS, \u201cThe general rule is that any gift is a taxable gift,\u201d and the gift will be valued at \u201cfair market value.\u201d This means you can\u2019t gift your child a 40-acre property and value it as $1, or gift a friend a Ferrari and value it as if it\u2019s a Honda Civic.<\/p>\n

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A Breakdown On The Rules Of Giving And Receiving <\/strong><\/h3>\n

If You\u2019re The Giver:<\/strong><\/p>\n