John M. Hoffman & Associates CPAs

Frequently Asked Tax Questions

Annual Gift Exclusion Amount

 

“What is the limit on annual "excludable" gifts?

• For 2010 the limits is $13,000 per person.

What this means is that any person can gift up to $13,000 to any other person without tax consequence. There is no need to file a gift tax return. People often get confused thinking that there is some tax deduction for doing this. There is no tax deduction but rather an "estate and gift tax free" ability to transfer assets to another person.

The common use for gifts of this sort are a wealth transfer downstream generation wise. Grandparents gifting to grandchildren for example (even into a college savings 529 plan). Another example is parents gifting to their own children. Couples can join in making a gift such that a married couple could (in 2010) gift $26,000 to their daughter and if they so chose $26,000 to their son in law.

Don't forget that gifting appreciated securities to your children or grandchildren does not solve the capital gains tax issue with those securities, that issue simply gets gifted as well. The tax basis for non-cash items gifted is "generally" the lesser of the fair market value at date of gift or the donor's cost basis.

WAITING TO SEE WHAT THE AMOUNTS ARE FOR 2011 AND FORWARD.....