Gift Tax Question

It is correct so far, mostly. You each can give up to $14,000, and not incur any gift tax. Even if you make gifts over that amount, you will not likely have to pay any tax at this time, but you will have to file a gift tax return. Any gifts over that amount will be added to your gross estate for estate tax purposes when you die.

By the way, if your son is married, you can give the couple double the amounts noted above.

Right.

If your gifts are $14,000 or less each, no 709 is necessary.

No, gift tax has nothing to do with income tax.

Thank you!

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Actually there is one small wrinkle I neglected to mention. If you don't live in a community property state, and the $28,000 you and your wife give isn't considered legally half from each of you, you will need to file a 709, and elect gift splitting. There is still no tax incurred, but in that case you are required to report it.

Hmmm....I live in NY (Unfortunately, and not for much longer), and NY is not community property, I believe it is an "equitable distribution" State. Based on my own reading of the instructions for the 709 I thought we had to file one, but a few locals told me I was wrong.

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The issue isn't how you would distribute property on divorce. It's who legally owns your money now. If you both earned money and you are each paying out of your own earnings, no problem. But if the money comes more out of the earnings of one than the other, doing a

709 and electing gift splitting is the safe way to go.

In addition to the information from Stuart, there is something else you need to watch out for. Let us say you gift $14K to your son. Come his birthday you give him a $100 Amazon gift certificate. Assuming he accepts it, you have now exceeded the annual limit and a 709 needs to be filed.

Very interesting, thank you for that! We already gave him some cash for his Birthday in April.....so we already would be automatically over the $14K I guess. I don't really care if we have to file a 709, unless there is some reason to avoid it. I've looked at the form and it does not seem to be a big deal in itself, but I always love to know what I am getting into ahead of time! Thanks again.

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Your answer has brought up another question. I have to go back in my records, but we probably gave gifts for Christmas 2013 as well as Birthdays in 2014. If the 2013 XMas checks were not cashed until sometime in 2014....do they count as 2014 gifts even though given in

2013? I'm guessing yes, but that's not based on anything. Thank you. ************* Some of my music:

Normally a gift is considered complete in the year it is given, not when the check is cashed.