The holidays are a time to focus on friends and family, and celebrating this special season often includes gifts. Whether your gift style tends toward entertaining, getting creative with thoughtful homemade goods, or scouring stores for the perfect item, chances are you’re making a list and checking it twice for your loved ones this season.
However, if you’re thinking of making more extravagant gifts this year, there are a few things to be aware of. You may know that large individual gifts are subject to federal gift tax, but are you familiar with these specifics?
- The annual gift tax exclusion for 2014 and 2015 is $14,000. (In other words, an individual gift over the $14,000 limit is subject to gift tax.)
- The gift tax exclusion limit applies to each individual gift. For example, you could give multiple individual gifts up to the exclusion limit without triggering the gift tax. Gift tax does not apply on gifts given to your spouse.
- You can donate an unlimited amount for educational or medical expenses as long as the money is paid directly to the educational institution or medical facility. This is a wonderful way of financial gifting because you can directly benefit your loved ones in very practical ways, without worrying about gift tax.
Your tax and financial advisors can help you understand the implications and necessary paperwork for your planned charitable and individual gifts. The IRS also provides additional information on gift tax, exclusions, and required forms.
