James F. McDonough
Of Counsel
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The Internal Revenue Service has so many tax laws that people may struggle to remain informed. One rule that could prove beneficial to people is the gift tax. Taxpayers are able to give $13,000 per year to as many donees as they desire, as long as the gift is deemed present interest by the IRS, which means the recipient can enjoy the immediate benefit in a significant way.
This is the perfect tax law for grandparents that want to invest in their grandchildren’s future. For example, grandma and grandpa can give each of their grandkids $14,000 tax free to help establish a college fund.
However, there are exceptions that allow people to gift more than $14,000. If the money is provided for the director payment of medical expenses or tuition on behalf of another person the gifts are non taxable as long as they are made directly to the medical provider or school.
The following are some other gifts that are non-taxable:
- Gifts between spouses if both are U.S. citizens
- Gist to a political organization for its use
- Gifts to certain charities
It is important that people understand exactly what the gift tax is because the current federal gift/estate tax is 40 percent. In addition to knowing the exemptions, Americans also need to be aware of which gifts will be taxed.
Parents that want to provide a son or daughter with money to help them to buy their first house need to understand that the gifted funds will be taxed. It is necessary to file a Form 709 gift tax return, which is recommended to be filled out with an experienced tax attorney so no mistakes are made.
- Practices: Tax and Trusts & Estates
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
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