If you’re fortunate enough to have a large bank account, you might want to share your wealth in the form of a cash gift or piece of property. However, if you’re handing over something that’s valued above $15,000 in a single year, Uncle Sam is going to try and get his cut.
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This occurrence is known as the “gift tax.”
The gift tax exists so prevent estate tax dodging that may be pursued when an individual is nearing the end of their life. But, for the most part, the IRS doesn’t care if you’re giving your money away so long as you don’t exceed the taxable amount.
The 2019 and 2020 annual exclusion is $15,000 while the lifetime exclusion for 2019 is $11.4 million and $11.58 million for 2020.
If you can stay within the proposed exclusions, you won’t have to pay a gift tax.
However, if you exceed the proposed exclusions, you’ll need to fill out a gift tax form when you file your taxes. There is paperwork you can file to try and get an exemption if deemed necessary.