Last week, the New Jersey legislature announced its plan to repeal estate tax by January…
Pointers on the Yearly Gift Tax Exemption
When you give money or property to another person as a gift, you may have to pay a gift tax. The tax is paid by the donor. The person receiving the gift does not have to pay the tax The exemptions for gifts and the gift tax rates are established by the IRS. In 2009 the gift tax exemption threshold is $13,000 meaning that all gifts to one person are not taxable if added together they do not exceed $13,000. Staying under this number means that no gift tax will be due and no gift return has to be filed.
As the holidays and year end approach, many people like to give gifts of money or assets. One important point to remember is that the IRS considers a check to be a gift in the year that it is cashed. Therefore if you are thinking about giving a hefty check to someone for Christmas or some other reason before year end, be sure they cash the check before the end of the year, if you want the amount to count for your 2009 gift tax exemption.
Also remember that the gift exemption is per person so if you are married, you can both give $13,000 to your son, for example, for a total of $26,000. Also you could give a gift to your son in December and then again in January of the following year and as long as your total gift amount does not exceed the exemption amounts for those two years, the gifts would not be subject to gift tax.
There are some gifts that are exempt from the gift tax. Those are gifts made to pay for education tuition and/or medical expenses, gifts to your spouse, and gifts to charity. Tuition payments and medical expenses need to be paid directly to the qualified institution and to the medical provider, not to the individual. Gifts can be made between spouses in an unlimited amount. Also, gifts to charity are unlimited. The donee has to be a qualified charity, however, and you can find out whether a particular organization is a qualified charity by contacting them.
If you are considering giving a very large gift, one over the exemption amount, it is a good idea to contact us.