Permalink Submitted by Alan Spross on Wed, 2011-03-02 22:25
13,000.
There are special exceptions. For example, a parent can make a contribution of 65,000 (5 years @ 13k) to a 529 plan for the child and the gift is averaged over 5 years. It must be reported on a 709, but does not incur tax. Also, a parent can directly pay education and medical costs in addition to the 13k.
Permalink Submitted by Thomas Ransone on Wed, 2011-03-02 22:46
Thanks Alan….that’s what I understood but I’m still a bit confused. In Ed’s Feb IRA Advisor he mentions the ability of clients to give away up to $5 million without incurring estate or gift taxes. I must be missing something, your help is greatly appreciated.
Permalink Submitted by mk foss on Wed, 2011-03-02 23:14
There are two important amounts regarding gift taxes. The first is the $13,000 per donee per year that Alan mentioned. If less than $13,000 is transferred there is no reporting required.
If the parent gives say $25,000 – a gift tax return must be filed. the first $13,000 will be the annual exclusion and the $12,000 balance reduces the $5,000,000 that someone can give during their lifetime before they actually pay taxes. The $5 million is unified with the estate tax credit so if someone gave a $25,000 gift in 2011 and died later that same year instead of having a $5,000,000 exemption from estate taxes, they would have only $4,988,000. There are many reasons to give gifts during life rather than paying an estate tax – the downside is that the donee receives the donor’s basis and could incur capital gains tax upon a sale that wouldn’t be applicable if the property was inherited.
Permalink Submitted by mk foss on Thu, 2011-03-03 00:52
Your’re correct. To further clarify – there is no income tax consequences to the person giving or receiving a gift. A gift tax return may be required but no gift taxes need to be paid until the gifts that exceed the annual exclusions on a cumulative basis exceed $5 million.
Permalink Submitted by Earl Hittinger on Wed, 2017-11-08 20:58
If cash gift below $14K is non-taxable, where in Form 1040 is the deductable value entered, and on what line, if schedule A? The funds would be derived over and beyond the IRA MRD! I believe the 1099R would reflect the total of MRD + Cash Gift amount??
Permalink Submitted by Alan - IRA critic on Wed, 2017-11-08 22:05
Apparently this is not a charitable donation or a QCD check made out to a charity, but a private gift. You cannot deduct a private gift on Sch A. If you take an IRA distribution with the intent to gift it, it can satisfy your RMD but you wll be taxed on the total distribution and will not be able to deduct it. If this does not make sense, please be more specific about where the gift is going.
Permalink Submitted by Alan Spross on Wed, 2011-03-02 22:25
13,000.
There are special exceptions. For example, a parent can make a contribution of 65,000 (5 years @ 13k) to a 529 plan for the child and the gift is averaged over 5 years. It must be reported on a 709, but does not incur tax. Also, a parent can directly pay education and medical costs in addition to the 13k.
Permalink Submitted by Thomas Ransone on Wed, 2011-03-02 22:46
Thanks Alan….that’s what I understood but I’m still a bit confused. In Ed’s Feb IRA Advisor he mentions the ability of clients to give away up to $5 million without incurring estate or gift taxes. I must be missing something, your help is greatly appreciated.
Permalink Submitted by mk foss on Wed, 2011-03-02 23:14
There are two important amounts regarding gift taxes. The first is the $13,000 per donee per year that Alan mentioned. If less than $13,000 is transferred there is no reporting required.
If the parent gives say $25,000 – a gift tax return must be filed. the first $13,000 will be the annual exclusion and the $12,000 balance reduces the $5,000,000 that someone can give during their lifetime before they actually pay taxes. The $5 million is unified with the estate tax credit so if someone gave a $25,000 gift in 2011 and died later that same year instead of having a $5,000,000 exemption from estate taxes, they would have only $4,988,000. There are many reasons to give gifts during life rather than paying an estate tax – the downside is that the donee receives the donor’s basis and could incur capital gains tax upon a sale that wouldn’t be applicable if the property was inherited.
Permalink Submitted by Thomas Ransone on Wed, 2011-03-02 23:58
Thanks! One last clarification please. The amount over 13,000 simply reduces the 5 million lifetime exclusion and avoids current taxation, correct?
Permalink Submitted by mk foss on Thu, 2011-03-03 00:52
Your’re correct. To further clarify – there is no income tax consequences to the person giving or receiving a gift. A gift tax return may be required but no gift taxes need to be paid until the gifts that exceed the annual exclusions on a cumulative basis exceed $5 million.
Permalink Submitted by Thomas Ransone on Thu, 2011-03-03 01:10
Great, thanks again.
Permalink Submitted by Earl Hittinger on Wed, 2017-11-08 20:58
If cash gift below $14K is non-taxable, where in Form 1040 is the deductable value entered, and on what line, if schedule A? The funds would be derived over and beyond the IRA MRD! I believe the 1099R would reflect the total of MRD + Cash Gift amount??
Permalink Submitted by Alan - IRA critic on Wed, 2017-11-08 22:05
Apparently this is not a charitable donation or a QCD check made out to a charity, but a private gift. You cannot deduct a private gift on Sch A. If you take an IRA distribution with the intent to gift it, it can satisfy your RMD but you wll be taxed on the total distribution and will not be able to deduct it. If this does not make sense, please be more specific about where the gift is going.