With less than two months left in the year, time is running out to take actions that will apply to the 2017 tax year. By ‘actions’ we mean things like charitable giving, tax loss harvesting, and in the case of this post, gifting.
Gifting and estate planning can be complex undertakings, due to the myriad of rules, strategies, and even loopholes involved. But the concept of gifting by itself can be rather simple: in 2017, you can give any number of people (it doesn’t matter how many) up to $14,000 in cash or other property without triggering any gift tax. If you include your spouse in the gift, that number jumps to $28,000.
An example with actual numbers should underscore just how impactful gifting can be. Say for example that you and your spouse make annual gifts of $28,000 to each of your three children and seven grandchildren. Over a period of 5 years, you will have gifted $1,400,000 – which also reduces the value of your estate for tax planning purposes by $1,400,000. Assuming the federal estate tax rate of 40%, that could mean saving $560,000 in estate taxes (40% x $1,400,000).[+] Read More