| Gift Tax Confusion…read on:
READER QUESTION:
I am confused. In your last LISTEN TO LAWRENCE LETTER, you wrote that there is no gift tax until you give away close to $14 million? I thought there was a tax if you give away more than $10,000 to anyone in a given year. What gives?
MY RESPONSE:
Actually, this is a very common misconception. First, the $10,000 per person per year rule is up to $19,000 per person per year.
They adjust it for inflation from time to time. This is called the annual exclusion. However, this number does not trigger a tax! Instead, this number is a reporting requirement.
Technically speaking, if you give away more than $19,000 per person per year, you are required to REPORT IT on a gift tax return. But reporting it does not mean you have to pay a tax. All of your taxable gifts (exceeding the annual exclusion) are added up during your lifetime, and if they exceed about $14 million, then you start to pay a tax. Got it?
I hope this helps! |
