| DAZED AND CONFUSED….read on:
READER QUESTION:
I heard that I have to pay gift tax if I make a gift that is over $10,000.
Is this true?
MY RESPONSE:
You are not even close.
First, the $10,000 rule has increased over the years (indexed for inflation) to $19,000 in 2025 and will continue at $19,000 in 2026.
Second, the $19,000 rule is a reporting requirement, not a trigger to pay tax. So, you can give up to $19,000 per year, per person, with no requirement to report it. If you exceed $19,000 to any person in any given year, you technically must file a gift tax return so that the government can keep track of all of your lifetime gifts. If all of your lifetime gifts add up to more than about $14,000,000 ($15,000,000 as of January 1, 2026), then you will actually have to start paying tax. Got it? As you can see, this does not cause a tax for most people.
Third, the $19,000 rule, as of January 1, 2026, has increased to $20,000
as it relates to contributions to an ABLE account for a person with disabilities. ABLE accounts used to track the gift tax exemption…no more. This has now been decoupled. The rule now is that an ABLE account for a person with disabilities can be funded from all sources (not each donor) with $20,000 per year (subject to large caps for SSI and Medicaid purposes).
Confused?
I hope this helps. |
