Did you know that you’re required to pay a gift tax whenever you give someone a gift with a value above $14,000? It’s enough to make you think twice about how you handle your gifts. A gift tax is necessary to prevent money laundering, but it’s a nuisance to people who simply want to give a high-value gift to family or friends.
Since 2013, the annual gift tax exclusion has been $14,000 per recipient, which means that that couples can gift up to $28,000 per recipient each year. There is also a lifetime gift tax exclusion of $5.34 million. You’re required to pay taxes on gifts over the annual exclusion amount. If your gifts exceed this amount, you could be taxed as high as 40 percent on the value of the gift.
Several items are excluded from gift taxes, such as money given to help someone with medical expenses or tuition costs. You can also give gifts to your spouse and political organizations without worrying about gift taxes.
To learn more about how gift exclusions work and how to prepare for gift taxes, take a look at the following NEU MSF Deal with Gift Tax infographic. It will help you make the most out of your tax-free gifts. If you plan ahead and track your gifts, you can transfer money to loved ones over time without any taxes.