We are here to help you navigate the ever-complex world of taxation. Today’s burning question: How much money can you give away without incurring a tax issue with the IRS?
Understanding the Gift Tax Exemption
Now, wouldn’t it be splendid to just hand out money willy-nilly? Unfortunately, the IRS isn’t quite as laissez-faire about such things. There are some limits to consider, but the good news is that the current laws are more generous than many people realize.
Every year, you can give a certain amount of money to any individual – let’s call this the annual gift tax exclusion. As of my last update in September 2021, that number was $15,000 per recipient per year. But remember, tax laws change, so it’s essential to check the current figure.
How Much Can You Give?
You’re probably thinking, “Okay, so I can give $15,000 each to my son and his wife. That’s $30,000 total. But what if I want to give more?” Well, you’re in luck! The IRS allows you to give over the annual exclusion limit without having to pay a gift tax, up to a certain limit.
This is where the lifetime gift tax exemption comes into play. As of 2021, the lifetime exemption was $11.7 million. So, theoretically, you could give away that much over your lifetime without incurring a tax issue with the IRS. Any amount gifted beyond this limit would be subject to the gift tax.
Spousal Gifts and Unified Credits
But wait, there’s more! If you’re married, the IRS allows for something called “gift splitting.” This means you and your spouse can each give $15,000 to your son and his wife. Now, you’re up to $60,000 in one year without triggering a tax issue with the IRS.
Also, if you’re married, you and your spouse each have the lifetime gift tax exemption. So you could potentially give away a combined total of $23.4 million over your lifetime without running afoul of the tax man. Talk about a power couple move!
Generosity is a wonderful trait, and it’s even better when you understand the tax implications. The IRS may have a say in how much you can give, but they also provide some significant allowances. So go ahead, help your loved ones out, but do so with the confidence of knowing how to avoid a tax issue with the IRS.
Just a reminder – always consult with your tax advisor or an estate planning professional for the most accurate and up-to-date information.
