Both the gift tax and the $16,000 annual gift tax exclusion (in 2022) confuse nearly everyone. The bottom line is that in early 2022 you can give away way more than $16,000 without paying gift tax. In fact, most people could give away every penny they have and still not pay gift taxes. Here’s some tips on how to give away assets without paying gift tax.
- In early 2022, you can give away $16,000 per calendar year to as many people as you’d like. The annual gift tax exclusion is unlimited, so long as you spread the gift among individuals so that no one receives more than $16,000.
- If you’re married, this amount doubles to $32,000 per individual to an unlimited number of individuals.
- Plus, you can pay an unlimited amount directly to the provider of education or tuition for as many people as you’d like. However, it is important to follow the rules for such gifts.
- Surprising to most people, with good reason, you can gift up to and additional $12.06 million to anyone you want in early 2022, using your lifetime unified credit exemption. That figure may change if some pending legislation in Congress becomes law.
- Again, if you’re married, this amount doubles to $24.12 million.
- So-called 529 plan (education savings accounts) for higher education have special rules. You can use 5 years of your annual gift tax exclusion all at one time for as many individuals as you would like. This means that, in 2022, you can fund a 529 plan with $80,000 all at once. But, remember that you can’t make additional gifts under your annual gift exclusion until 5 years lapses.
- You guessed it, if you’re married, in 2022, you and your spouse can jointly gift $160,000 into all the 529 plans you want without incurring any gift tax.
If you make annual gift tax exclusion gifts (i.e. $16,000 or $32,000) or gift directly to a medical or education provider, you do not need to file a gift tax return. However, if you use some of your lifetime unified credit exemption, you must file an informational gift tax return (IRS Form 709) even though no taxes will be assessed.
While valuable planning tools when properly executed, gifting strategies are complicated. If you are interested in gifting in amounts greater than $16,000 per yer per person, it would be prudent to consult with an experienced and qualified estate planning attorney and tax advisor.