Did you know that there’s U.S. laws that tell you how much money you can gift your kids?
Basically each parent can gift each kid (or anyone, can be a friend, cousin, etc…etc..) $13,000 a year without any reporting and taxes.
That means both parents together can gift each of their kids $26,000 a year without having to pay any taxes.
Of course, don’t forget to send “separate” checks from each parent, that will make it clear that it’s coming from each parent.
What happens if you go over the annual limit of $13,000?
Uncle Sam gives every U.S. citizen a “lifetime” gift tax exclusion for up to $1 million.
This means that even if you go over that $13,000 limit, it will get counted into your lifetime gift tax exclusion.
So, let’s say you give your daughter $100,000 this year, $87,000 of that money gets counted as “lifetime gift tax exclusion”.
This amount is kept by the IRS for your lifetime and if you don’t go over that $1 million mark before you die, you actually won’t have to pay any taxes.
Also, if you go over the annual limit and you want the extra money to be counted towards your “lifetime gift tax exclusion” you MUST file a form 709 on that tax year. If you don’t, you might be subject to serious consequences like 20% or more of taxes.
One of my friends was asking me research this very subject last night so I though I’d tell you about it.
Remember, it always helps you to know the law first, then you will be able to manage your money better.