Gift Tax Question

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
Norwegianwood
Posts: 48
Joined: Fri Feb 14, 2020 11:10 am

Gift Tax Question

Post by Norwegianwood »

The annual gift tax exclusion of $16,000 for 2022 is the amount of money that you can give as a gift to one person, in any given year, without having to pay any gift tax.

So if I wanted to gift my brother some money, I can write him a check for $16,000 and my wife can write him another check for $16,000 in the same year. Correct? And can we use the SAME bank and checking account to do this (we have a joint checking account) or should we each use different banks/checking accounts?

Thank you.
“If you don’t know where you’re going you might wind up someplace else” - Yogi Berra
Jack FFR1846
Posts: 18461
Joined: Tue Dec 31, 2013 6:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Gift Tax Question

Post by Jack FFR1846 »

Yes, you can do this. To answer the "which account" question, if you have other checking accounts, just use separate ones. The thing to ask yourself is: "If you were to be audited and the IRS agent wanted proof that money came separately from you and your wife, would 2 checks from the same account satisfy them?". I would not be surprised to find that the answer is no.
Bogle: Smart Beta is stupid
basicbrewing
Posts: 12
Joined: Mon Oct 03, 2022 8:54 am

Re: Gift Tax Question

Post by basicbrewing »

Norwegianwood wrote: Mon Oct 03, 2022 10:47 am So if I wanted to gift my brother some money, I can write him a check for $16,000 and my wife can write him another check for $16,000 in the same year. Correct?
Correct. it is also Worth mentioning that even if you were to go over that $32k in a year, yuo still wouldn't be required to pay any "gift taxes", you would just have to file From 709 to report that you gave a gift in excess of the annual exclusion limit. This gift will then count against your total lifetime maximum exclusion (which is currently $12mil+ per person). So you don't actually pay any gift taxes until you give away $12mil dollars or more in your life.
jebmke
Posts: 25271
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Gift Tax Question

Post by jebmke »

Jack FFR1846 wrote: Mon Oct 03, 2022 10:55 am Yes, you can do this. To answer the "which account" question, if you have other checking accounts, just use separate ones. The thing to ask yourself is: "If you were to be audited and the IRS agent wanted proof that money came separately from you and your wife, would 2 checks from the same account satisfy them?". I would not be surprised to find that the answer is no.
I would think the fact that the spouse has 50% ownership of the joint account AND signed the second check would satisfy them. In any case, the amount is really only relevant wrt to the gift tax return filing requirement. The actual tax liability is most likely zero -- even if the amount exceeded $16K.
Stay hydrated; don't sweat the small stuff
toddthebod
Posts: 5596
Joined: Wed May 18, 2022 12:42 pm

Re: Gift Tax Question

Post by toddthebod »

Norwegianwood wrote: Mon Oct 03, 2022 10:47 am The annual gift tax exclusion of $16,000 for 2022 is the amount of money that you can give as a gift to one person, in any given year, without having to pay any gift tax.
This is incorrect. $16,000 is the amount of money you can gift without having to file paperwork and count the gift against your lifetime gift tax exemption which is approximately $11 million right now.
Norwegianwood wrote: Mon Oct 03, 2022 10:47 am
So if I wanted to gift my brother some money, I can write him a check for $16,000 and my wife can write him another check for $16,000 in the same year. Correct? And can we use the SAME bank and checking account to do this (we have a joint checking account) or should we each use different banks/checking accounts?
You can just write him a single check for $32,000.
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Gift Tax Question

Post by delamer »

To clarify, the issue with the $16,000 limit isn’t avoiding a current gift tax.

You wouldn’t owe any current tax if you each gave him $100,000.

The issue is that if you limit the gift to $16,000, then you don’t have to report it to the IRS. Therefore, it does not reduce your estate tax exclusion when you die.

Currently, for an individual, the estate tax exclusion is about $12,000,000.

So for example, say an individual gifts $100,000 to their brother.

Then the giver’s exclusion is reduced to about $11,916,000 ($1200K-$100K+$16K) at death. (Simplifying from married exclusion for example purposes.). Which means more of their estate is potentially subject to the estate tax upon their death.

It obviously isn’t a problem for too many people given the amount of the exclusion. But Congress can change it to a much lower amount. When my parents did their wills in the 1990’s, the exclusion was only $600,000/person.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Gill
Posts: 8221
Joined: Sun Mar 04, 2007 7:38 pm
Location: Florida

Re: Gift Tax Question

Post by Gill »

delamer wrote: Mon Oct 03, 2022 11:18 am. When my parents did their wills in the 1990’s, the exclusion was only $600,000/person.
When my father died in 1976 the marital deduction was limited to 1/2 the adjusted gross estate and the estate tax exemption was $60,000. We paid a Federal Estate Tax on an estate of 150,000

Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
Post Reply