Gift Giving Now Has New Tax Limits From the IRS

Mark Hake

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It Just Got Easier To Give and Receive a Gift Up To $16,000 in 2022

The IRS just jacked up the amount of gifts that you can give and receive tax-free from $15,000 in 2021 to $16,000 in 2022.

And this applies per person. So you can give as many people as you want (up to a large limit) the $15,000 gifts in 2021 and now $16,000 in 2022.

Neither the giver nor the receiver needs to pay tax on these gifts. This is known as the annual exclusion for gift tax. You can now see this on the IRS website about gifts.

What About Gift Taxes?

As long as you are at or below the annual gift tax exclusion ($15K during 2021 and $16K during 2022), you don't have to pay any gift taxes.

But even if you give more than this, it applies to your lifetime Estate Tax Exemption. In 2021 that is $11.7 million and it rises to $12.06 million (twice per couple) in 2022.

So, for all intents and purposes, if you give more than $16,000 in 2021, you still won't pay any gift taxes. At that point, however, you might want to discuss your specific situation with your tax accountant.

For example, it turns out that if you are eventually going to give away a large amount of money it might make sense to do it over time. That way, you still stay under the exemption, and as the assets grow in value, that accrues to the receiver, not the giver.

How This Affects Most People

Many people think if you give a large amount of money to another person you have to pay a gift tax. Given the limits I talked about, the bottom line is you won't be paying tax. And with these same limits, if you receive the gift, you won't pay tax either.

Keep in mind this is not tax or financial planning advice. However, the general rule is you don't have to pay taxes in 2021 on gifts that are $15K and in 2022 gifts that are $16K (unless, of course, you go over the $11.7 million estate tax exemption in total in 2021 and $12.06 million in 2022).

That might make your Christmas more exciting. You could write 10 checks for $16K and date them for Jan. 1, 2022, and give them to your family for Christmas (or 10 checks for $15K dated in 2021). That is just one example, where no one would pay any gift tax.

Of course, if you have a large amount of money to give away, you likely would be able to afford an advisor to help you figure this out anyway.

By the way, I normally write about stocks, cryptos, and hedge funds. Sometimes I get into financial planning when there is news like with this higher gift tax exemption. You might want to follow me - don't forget to fully "Follow" me and make sure to download the Newsbreak app to become a Registered Follower. This way you can also see all my articles in the past. Click on the link underneath my profile name.

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This is not financial advice and you should not rely on my analysis to buy or sell any stock, security, or crypto, as I am not undertaking to induce you to buy or sell securities.

I am relying on the “publisher’s exclusion” in the Investment Advisers Act of 1940 to provide this information without any personalized or individualized investment advice.

This represents my analysis of gift and estate tax exemptions and it is not meant to provide you with specific advice in your own situation. You will definitely need to undertake to consult your own tax and wealth management advisors to confirm any plans you might have in this regard.

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Mark Hake is a financial analyst, investor, and Chartered Financial Analyst (CFA). He writes about US and foreign stocks as well as cryptos, hedge funds, and private equity. He previously ran his own hedge fund, investment research firm, and acted as CFO for a fintech startup. He focuses on finding value, arbitrage, and hidden asset opportunities.

Phoenix, AZ
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