For tax reasons, it's important to pay attention when you transfer money or another property that can be valued in dollars to someone. The IRS may consider it a taxable gift unless you get compensated for the full value of what you gave away. You may avoid the gift tax in certain circumstances, but figuring out how to be exempt can be tricky. The IRS says the laws regulating this part of the tax code are among the most complicated. It could pay to get the help of an estate lawyer or tax accountant.
Give a single individual no more than what the IRS says is exempt from the gift tax during the fiscal year. If your gift is tangible, have its value appraised to avoid incurring the tax. Tax payers are allowed to annually transfer up to $13,000 tax-free, as of publication. A separate cap applies to each recipient. Thus, you may give $13,000 to your daughter, for example, and another $13,000 to your son without owing the gift tax.Step 2
Identify the educational and medical needs of the person you want to benefit with your gift. Make the transfer directly to the providers who can meet those needs. The tax code lets you pay for someone else’s tuition and medical expenses without incurring the gift tax.Step 3
Use your property to support a political cause and avoid the gift tax. Donations to political organizations for their use are exempt from the taxation.Step 4
Shower your spouse with as much as you want without fear of being penalized. The U.S. tax code excludes transfers of property between spouses from the gift tax.
- The IRS could change the gift limit from $13,000. Refer to the agency’s information on the gift tax for the fiscal year of your return.
Emma Watkins writes on finance, fitness and gardening. Her articles and essays have appeared in "Writer's Digest," "The Writer," "From House to Home," "Big Apple Parent" and other online and print venues. Watkins holds a Master of Arts in psychology.