gifting money from trad ira
Married, 68, Trad IRA for 10 years. living in California.
if I gift $60,000 from my Traditional IRA to my daughter, is it correct that my wife and I can claim $15,000 each as a gift? The remaining $30,000 can be declared for the next year to avoid a gift tax and not be part of the lifetime gift limit.
Also, would the $60,000 be treated as taxable income to me as it came from my Trad. IRA?
Thanks
Permalink Submitted by Alan - IRA critic on Sat, 2018-08-11 17:28
You must account for the gift in the year you make it. You would save more money by distributing just 30k this year, depositing it in a community property account for awhile and then making the split gift. A gift of community property is deemed to be made 50% from each spouse, so you would not have to file a gift tax return. Then in January, 2019 do the same with the other half. Of course, you will owe taxes on the IRA distribution and you cannot gift the IRA itself, but making a distribution over 2 years may lower your total tax bill, and also allow you to avoid filing any gift tax returns. You can gift up to 30k per year, so you may want to gift that much even though your after tax proceeds from the distributions will be considerably less than the 60k.
Permalink Submitted by David Mertz on Sat, 2018-08-11 18:01
If you need to take an IRA distribution to be able to make the gift, you might have to take from the IRA more than the amount of the gift so that you will have enough to cover the federal and state taxes on the distribution. For example, if your combined federal and state marginal tax rate on the distribution will be 30% and the tax liability will need to be funded with the IRA distribution, to net enough to make a $30,000 gift you’ll need to take a distribution of $42,857 and have $12,857 withheld for federal and state taxes.