![]() ![]() Gifts covering another person’s tuition expenses, as long as you make payments directly to the educational institution.Gifts covering another person’s medical expenses, as long as you make the payments directly to medical service providers.Gifts to your spouse (assuming they are a U.S.You can make unlimited gifts in these categories without any gift tax or estate tax consequences and without having to file gift tax returns: The following types of gifts are some examples of gifts that are exempt from the federal gift tax. The only caveat: You can’t make any additional gifts to the same recipient during those years without using part of your $12.06 million exemption. Your spouse can spread their $80,000 gift over five years as well.You can spread the gift over 2022-2025 without incurring any gift tax and without reducing your $12.06 million lifetime gift tax exemption or your $12.06 million estate tax exemption.If you’re married, your spouse can do the same. However, a special rule allows you to make a lump-sum contribution in a single year and treat it as though it was made over five years for gift tax purposes.įor example, you can contribute $80,000 in 2022 to jump-start a 529 college savings account for your child. You can even make a lump-sum contribution in a single year and treat it as though it was made over five years for gift tax purposes, thanks to a special IRS rule.Ĭontributions to a 529 college savings plan are gifts to the future student. TurboTax Tip: You and your spouse (if you’re married) can each contribute up to $16,000 per year to a 529 college savings plan for a future student without decreasing your lifetime gift tax exemption. The separate $10,000 gift in 2022 and the three $16,000 gifts in 2022 would not reduce your estate tax exemption.īottom line: Making annual gifts up to the exclusion ($16,000 in 2022) is a good way to reduce your taxable estate without any negative side effects.However, gifts in excess of the annual exclusion also reduce your estate tax exemption. Gifts made during your lifetime will reduce your taxable estate by moving assets out of your ownership and therefore out of your estate. If you’re married, your spouse is entitled to a separate $12.06 million exemption. You can leave up to that amount to relatives or friends free of any federal estate tax. You have a $12.06 million federal estate tax exemption for 2022. Gift taxes and estate taxes are connected If you give three individuals $16,000 each in 2022, these gifts are ignored because no single gift exceeds the annual exclusion. The other gift of $10,000 is ignored because it’s below the $16,000 annual exclusion for 2022.Assuming you haven’t, the two taxable gifts simply reduce your lifetime exemption by $5,000 for each gift or $10,000 total for the two gifts.But you won’t actually owe any gift tax unless you’ve exhausted your lifetime exemption amount. The $21,000 gifts are called taxable gifts because they exceed the $16,000 annual exclusion. Say you give two favored relatives $21,000 each in 2022 and give another relative $10,000. ![]() (After 2022, the $16,000 exclusion may be increased for inflation.) ![]() The annual federal gift tax exclusion allows you to give away up to $16,000 each in 2022 to as many people as you wish without those gifts counting against your $12.06 million lifetime exemption. The annual gift tax exclusion provides additional shelter But you may still have to file gift tax returns even though you don’t owe any tax. So, actually owing the gift tax is not a concern for most folks.
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