How much can I give to my children without having to pay tax?

This question gets asked a lot and is often misunderstood by the individual when asking the question. The real question should be “How much can I give to my children without having to file a gift tax return?”

A gift tax return must be filed if an individual gifts an amount over $14,000 per year to another person. However, unless your lifetime gifts exceed the federal estate exclusion, currently 5.49 million, you aren’t likely to pay any tax anyhow. Still, filing a gift tax return can be avoided by spreading the gift out, or by gifting from two individuals to multiple people.

For example, if parents of a married couple want to gift $50,000 to their married daughter for a down payment on a house, the taxpayer can gift the daughter 14,000, the son-in-law 14,000, and the spouse can gift the daughter 14,000 and the son-in-law $8,000 for a $50,000 total non-taxable, non-reportable gift.

All of this may change shortly as a major overhaul of the estate tax, potential elimination, is part of the Trump and Republican tax plans that are likely to be in front of Congress shortly.

Our office will keep you informed on developments, but please consult us if you have additional questions regarding taxation of gifts and your estate plan.