For years and years of giving gifts to your loved ones, have you ever thought of the gift tax law? Most probably not. Mainly because the spotlight does not focus on this kind of law.
But reality based, there is such thing as gift tax law and every citizen should know about it. This way, you’ll be able to determine which gifts are taxable and which are not. Technically, it will enable you to avoid giving gifts that are taxable.
To start things out, here’s a brief guide to help you avoid such kind of tax.
Understand the law
In the basics of gift tax, the tax is charged only to the sender and not to the receiver of the gift. If you had given a gift worth $12,000 and below, you will not be subjected to any kind of tax.
On the contrary if you will give way too expensive gifts then gift tax will arise. On the receiver’s side, the gift amount will not bother him since he is not entitled to pay gift tax or any kind of tax similar to it.
Discover the exceptions
Although gift tax exists, there are still ways to avoid it. The second step would be to give gifts that are to be used in such ways that it won’t be taxed. You can give a cash gift of $30,000 without being taxed if the entire cash will be used for tuition fees or medical expenditures.
However, this money should be paid directly to the medical or educational institution.
You can also give politics-related gifts, which are non-taxable. Such gifts can be for a certain political organization. This gift should also be used only for the benefit of the organization and not for any other individual or entity.
There are also charitable organizations that are eligible to receive non-taxable gifts.
Limit or split your gift-giving hobby
If you’re fond of giving out gifts, you may want to consider limiting it. This way, there will be an assurance that you will avoid paying too much gift tax.
You can also lessen or totally avoid the tax by slitting the gifts. Instead of fusing the entire amount into one, you can give it to the receiver by halves or you can ask your spouse to give the other half.
Take advantage of annual gift exclusion
If there’s a tax gift that necessitates people to pay tax, there’s also an annual tax exclusion that spares people like you to pay tax. Annually, every individual gets a $13,000 worth of gift that’s non-taxable. Taking advantage of this gift exclusion will spare you from paying too much gift tax.
Being charged with gift tax may be new to some people but for those who love giving out gifts, it’s a common thing already. Although you will be required to pay such tax, there are still ways for you to avoid it. By carefully studying these tips, there’s a higher chance for you not to deal with any gift tax at all.