It's Hard To Beat The Annual Gift Tax Exclusion For Ease
Published Tuesday, November 28, 2017 at: 7:00 AM EST
The calls for tax reform are growing louder in Washington. Among other proposals, the Trump administration advocates a repeal of federal estate taxes. Yet even with that possibility looming, it's hard to go wrong by giving away assets to family members in lower tax brackets.
Not only will this reduce the size of your taxable estate, it will likely save income tax in the future, regardless of the fate of tax reform. Best of all, the gifts are sheltered from federal gift tax by the annual gift tax exclusion.
That exclusion covers the value of any gifts, including cash and securities, up to $14,000 in 2017 and you can make gifts to as many people as you like. You don't even have to file a gift tax return. What's more, the annual exclusion is doubled for joint gifts made by a married couple, though you do have to file a gift tax return in this case.
The IRS recently announced that the exclusion will increase to $15,000 per recipient for the 2018 tax year. The exclusion is indexed for inflation and is increased only in increments of $1,000. The last hike was five years ago.
Therefore, if you and your spouse have four children and six grandchildren, say, you could give them each $30,000 in 2018 for a total of $300,000, without paying a penny of gift tax. Consider how this simple technique can benefit your situation.
This article was written by a professional financial journalist for Preferred NY Financial Group,LLC and is not intended as legal or investment advice.
An individual retirement account (IRA) allows individuals to direct pretax incom, up to specific annual limits, toward retirements that can grow tax-deferred (no capital gains or dividend income is taxed). Individual taxpayers are allowed to contribute 100% of compensation up to a specified maximum dollar amount to their Tranditional IRA. Contributions to the Tranditional IRA may be tax-deductible depending on the taxpayer's income, tax-filling status and other factors. Taxed must be paid upon withdrawal of any deducted contributions plus earnings and on the earnings from your non-deducted contributions. Prior to age 59%, distributions may be taken for certain reasons without incurring a 10 percent penalty on earnings. None of the information in this document should be considered tax or legal advice. Please consult with your legal or tax advisor for more information concerning your individual situation.
Contributions to a Roth IRA are not tax deductible and these is no mandatory distribution age. All earnings and principal are tax free if rules and regulations are followed. Eligibility for a Roth account depends on income. Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions).
© 2024 Advisor Products Inc. All Rights Reserved.