Clarifying the Gift Tax Return - The $15,000 Rule

August 16, 2019

Many people are under the mistaken impression thatthey can only give $15,000 per person per year to avoid gift tax. Actually, therule is that if you give more than $15,000 to one person in a given year youmust file a gift tax return. This allows the IRS to track your lifetime giftsto determine if you exceed the exclusion allowed.

Thefederal gift tax exclusion amount is currently $15,000 – but that is not themaximum amount you can “gift tax free.”  The gift tax exclusion is themaximum amount you can gift each year to any number of persons without filing aFederal Gift Tax Return, and without having such gifts counted toward yourlifetime exemption from federal gift and estate tax.

However,the federal lifetime estate and gift tax exemption is now $11,180,000 for anindividual, and twice that for married couples. Maryland does not impose astate gift tax.

So, if you make a gift of more than $15,000 in 2018, you willnot owe any tax unless you have already made reportable gifts in excess of yourfederal lifetime exemption.  The only “penalty” for making a gift inexcess of $15,000 is the obligation to file a Federal Gift Tax Return, whichallows the Internal Revenue Service to keep track of your lifetime gifting.

If you want to make a gift that exceeds $15,000, go ahead and do it. Just remember to have your accountant prepare a Gift Tax Return for you. For more information on estate planning and charitable giving, contact Stouffer Legal at 443-470-3599 in the Greater Baltimore area.

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