The ability to make gifts to people on an annual basis and throughout your life is an excellent way to reduce your taxable estate size. However, the specifics of the gift mean that you might trigger the need for a gift tax return.
Gift giving is a frequent strategy used by many people to avoid many types of taxation. When done legally, this can be a powerful strategy to use but it is important to recognize your rights and responsibilities because the IRS has established very clear guidelines about who needs to file a gift tax return. You won’t owe taxes on most gifts unless you have gifted over $11.7 million in your lifetime. For example, if you gifted a vehicle worth more than $15,000 in the last year, you would need to file a gift tax return.
This is especially important to consider in the current climate because used cars have a 20% higher current average value when compared with last year. If you made a significant gift to help a loved one pay a down payment on a new house, you may also need to file a gift tax returns.
Likely if you gifted more than $15,000 to your child or grandchildren’s 529 plans, those would be considered gifts and would require a gift tax return. If you have specific questions about gifts you have made recently and whether or not these require a gift tax return, it is best to consult directly with an estate planning lawyer and your financial professional.
Reach out to our Pasadena estate planning office today for more support.