Gift Tax Return Due Date 2022
Gift Tax Return Due Date 2022 - It seems like Uncle Sam manages to take a bite out of everything these days, but is the government really giving away gifts? Yes (see eye roll). But don't worry—there's no need to curb your generosity. You won't be taxed on the $100 bill you put in your teenage son's birthday card (which he quickly pocketed after reading your heartfelt note).
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Gift Tax Return Due Date 2022
Or that $650 washing machine you bought for a friend. In fact, you can give away quite a bit before you owe taxes on your gifts. The gift tax exclusion for 2022 is $16,000 per recipient. 1 This means, if you had the money, you could pull out your checkbook and write $16,000 checks to your mom, your brother, your sister, and your new best friends (you have a lot) of "friends".
when you start giving away free money) – and you don't have to pay gift tax. Any gift over that $16,000 amount is taxable, but there are exceptions to that rule, which we'll talk about a little later. Don't mess with tax software that has hidden fees or agendas.
Use someone who is on your side - Ramsey SmartTax. So, here's a closer look at what you need to know when it comes to gifts and taxes so that when you're out there you're ready to roll and give like no one else. Well, first things first.
What’s Considered A Gift?
Before we get into the specifics of the tax code, let's look at what a gift is. It is not just the pile of money that you gave your son to buy a bike. It could be the pile of money you spent on your daughter's wedding.
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Or the car Grandpa Jr. used for his high school graduation. Basically, any property — cash or real estate — that you give to someone without directly or indirectly receiving an equivalent value (aka fair market value) is a gift, according to the IRS. This is correct.
Anything that someone gives you as a gift could potentially be the first time Uncle Sam called Dibs. For example, if you loan $5,000 to a friend without interest, the government says that's a gift. (It's also a bad idea - you don't want to turn your friendship into a banking relationship by playing with the loan!) What about forgiving the loan when you come back?
Gift a friend a blessing of cash to help them get through a tough time? Yes, this is also a gift. If you give someone a gift that exceeds the gift limit of $16,000, you are responsible for paying gift tax. In some circumstances, you can make special arrangements to have the recipient pay the tax instead, but this is rare.
What’s Considered A Gift?
As we mentioned earlier, the annual exclusion limit (the limit on tax-free gifts) is $16,000 per person per year for 2022 (it's $17,000 for gifts given in 2023). Unless you exceed these limits, a gift tax return will need to be filed. If you give more than $16,000 to one person in a calendar year, the dance gets a little more complicated.
Let's say you want to help your daughter buy her first house, so you give her a check for $32,000. You subtract the $16,000 annual exclusion from the total to figure out how much is taxable. In this case, the remaining $16,000 is taxable. Therefore, when you file a gift tax return, you'll be responsible for taxes on only $16,000 of the $32,000 — or you can apply this to your lifetime gift exclusion (more on that in a minute).
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And as an added bonus, if you're married, each spouse is eligible for the $16,000 exclusion. So, looking at the same example, you and your partner could each give $16,000 to your daughter for a total of $32,000 without exceeding the annual limit. Another way to dance around the gift tax is through the lifetime gift tax exclusion.
That's the total amount — $12.06 million for 2022 — you can give away tax-free through the annual gift tax exclusion during your lifetime (the exclusion increases to $12.92 million for 2023). The exclusion has been doubled to $24.12 million for married couples. The lifetime gift tax exclusion is shared with the estate tax, meaning the more money you pass on to the annual gift exclusion, the less money you can pass on to your heirs tax-free when you die but $12.06 million.
Annual Gift Exclusion
There is such a great limit that most of us will never reach it. Consider our first example: You want to leave $32,000 for a house to your daughter. The first $16,000 is exempt and tax free. For the remaining $16,000, you'll need to file a gift tax return -- but you won't owe taxes on the additional money.
You can choose to apply this amount to your lifetime exclusion. In this case, you would subtract $16,000 from your lifetime cap of $12.06 million, leaving you with $12.044 million to work with. So why file a tax return if you can skip the gift tax?
This is a way for the IRS to track your lifetime exclusion limit. The more you eliminate your lifetime exclusions, the less you'll be left with to protect your assets from being taxed down the road. If you think your assets will exceed this lifetime limit (if so, good for you!), it may make sense to pay the tax on gifts now so you can protect your assets later.
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As wonderful as gifts are, they can still be a little confusing, so be sure to work with a tax professional. That way, you can have peace of mind knowing that you have someone in your corner to make sure you make the right calls for your situation.
Annual Gift Exclusion
If you are successful in using all of your exclusions, you will probably owe gift tax. If that's the case with you, brace yourself – the actual gift tax can vary between 18% and 40% depending on the amount you give.4 That's certainly not chump change!
And just a quick reminder: The 2018 tax reform law doubled the lifetime exclusion through 2025, but it's set to return to pre-2018 levels of about $5 million in 2026. 5 Because gift tax rates can change—and do change often—always make sure you work with a tax professional so you have the most up-to-date information.
While most gifts are technically taxable, there are some exceptions to the rule. Generally, gifts that are considered non-taxable include: When we are talking about gifts, it is important to note that only certain types of gifts can be deducted from your taxable income - Usually these are gifts that are given to a worthy charity. The donation is called a charitable donation.
Taxes can make your gift a little more complicated, but remember: There's nothing like the feeling of giving a gift to someone who needs it! Generous people are also happier and more satisfied. When you do good to others, you do good to yourself. There are some tax considerations to keep in mind when you move, but don't let that deter you.
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