In Ashland, Kentucky, gifts that you give to others, including your children, are potentially taxable on the federal level. Because of the unlimited marital deduction, you can give unlimited gifts to your spouse free of the gift tax, but gifts to everyone else are subject to the tax.
The reason why you generally do not have to write a check is because of the fact that there are gift tax exclusions. First, let’s look at the annual per person gift tax exclusion.
$14,000 Per Year, Per Person
During a given calendar year you can give as much as $14,000 to any number of people free of the gift tax. The sum total of these gifts can equal any amount of money, as long as you don’t give more than $14,000 to any one person.
If you are married, you and your spouse can combine your respective exclusions to give as much as $28,000 to an unlimited number of gift recipients each year tax-free. (If you are not each giving $14,000 or less, you may be required to file a gift tax return.)
Utilization of this exclusion can be part of an estate tax savings strategy. When you give tax-free gifts using this $14,000 annual gift tax exclusion, you are transferring assets tax-free as you reduce the taxable value of your estate.
This exclusion can be used to give direct cash gifts, but you can also use it to incrementally fund certain types of trusts. The annual gift tax exclusion can also be used to distribute shares in family limited partnerships tax-free.
Unified Lifetime Gift and Estate Tax Exclusion
The federal gift tax is unified with the estate tax. There is a unified lifetime exclusion that currently stands at $5.34 million in 2014. You can transfer this amount of money tax-free. Anything that you transfer that is in excess of this amount is potentially subject to the gift tax or the estate tax.
This exclusion is separate from the $14,000 annual gift tax exclusion. As result, you could give a tax-free gift to someone in a given calendar year that exceeds $14,000 by using a portion of your unified lifetime exclusion.
To provide an example, suppose you give your son $14,000 for his birthday on February 1st. You can give this gift tax-free using your annual per person gift tax exclusion.
Later in the year your son gets married, and you want to give him money to purchase his first home. You could give this gift tax-free, but you would be using some of your $5.34 million unified lifetime exclusion to do so. You would then have less than $5.34 million left that could be applied to the value of your estate and any future tax-free gifts that you may give.
Gift Tax in Ashland Free Consultation
If you have questions about gift tax in Ashland as well as federal transfer taxes, contact us to schedule a free consultation. You can request an appointment through the contact page on this website.