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The Suburbanite
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Give Away Tax-Free Gifts for Christmas before Year-End!
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By Dee Siegferth
When it comes to financial and estate planning, Dee believes the entire process revolves around the person and their specific situation. She believes that it is important to develop the right investment, retirement, insurance, asset protection and ...
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When it comes to financial and estate planning, Dee believes the entire process revolves around the person and their specific situation. She believes that it is important to develop the right investment, retirement, insurance, asset protection and estate plan for each individual client.
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It is almost Christmas--some grandparents, aunts, uncles or even parents would rather give gifts of meaning.  I have discussed giving contributions for education using life insurance, Coverdell or 529 plans in a previous post.

Since writing that particular article, I discovered  that many of my clients, staff and readers did not  know about one of the easiest and probably the most popular year-end tax planning ideas;  using gift tax exemptions for gift giving.

Any tax payer can use this tax- free gift idea for tuition or as gift ideas for loved ones.  The big question is how much can a tax payer gift?

According to the IRS, a married couple has the right to donate up to $28,000 apiece and ($14,000 for a single person) to as many deserving beneficiaries as they can find. The recipient of the gift receives this gift tax-free!

If the donor stays within the gifting limits for that particular year, the gift is tax- free to the donor as well. Movie stars and wealthy people have continued to take advantage of this gift exemption strategy to move assets out of their estates.

The IRS website covers the most common questions asked about gifting at www.irs.gov, which I have included below:

What is considered a gift?

Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.

What can be excluded from gifts?

The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.



  1. Gifts that are NOT more than the annual exclusion for the calendar year.  (2013 Annual Gift Tax Exclusion is $14,000).


  2. Tuition or medical expenses you pay for someone (the educational and medical exclusions).


  3. Gifts to your spouse or loved ones.


  4. Gifts to a political organization for its use. In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.




May I deduct gifts on my income tax return?

Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions). If you are not sure whether the gift tax or the estate tax applies to your situation, refer to Publication 950, Introduction to Estate and Gift Taxes.  Source:   irs.gov

Giving a gift to loved ones before the year ends may be something that readers want to consider.  I have found some of my clients who are grandparents or aunts/uncles are taking advantage of gifting to their younger loved ones; especially since it is has become quite difficult for high school or college graduates to support themselves and pay off student loans at the same time they are trying to pursue their careers, get married or raise families.

Happy giving,

Dee

Securities offered through Wall Street Strategies, Inc. 362 N. Main Street Huron, OH 44839 (419) 433-5291 Member FINRA & SIPC

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