If you’re planning to gift cash or property in 2023, take a look at how the changes could affect you!
What is the Federal Gift Tax?
The federal gift tax applies to all gifts of property, including cash gifts, by an individual during the year. This tax is usually paid by the person giving the gift. However, if the person gifting the property doesn’t pay the tax, the recipient may have to pay it. Also, if the person giving the gift dies before the tax is paid, the estate is responsible for paying the tax.
These gifts aren’t limited to just cash and real property. They can also include giving your child a car, forgiving your brother’s debt, deeding a plot of land, or transferring stock. Keep this in mind when you’re calculating your taxes next year.
The gift tax generally doesn’t apply to gifts to:
- Your spouse;
- Charitable or religious organizations;
- Political organizations;
- Educational organizations as tuition for someone else; and
- Doctors or other health care providers as payment for the medical care of someone else.
Make sure to consult an attorney or tax professional before gifting to make sure that the exemption applies in your specific case.
What is the Federal Gift Tax Threshold in 2023?
The short answer is $17,000 (This was $16,000 in 2022). This means that you can gift up to $17,000 to as many people as you want in 2023 without needing to pay the Federal Gift Tax. If you are married, this means you and your spouse can both gift up to $34,000 per person without having to pay the Federal Gift Tax. Remember that this is an annual Gift Tax, so these must be given by December 31st, 2023, and must be deposited before that date as well.
What if I Exceed the Gift Tax Threshold?
If you find that you have been exceedingly generous in 2023 and given gifts in excess of the $17,000 limit, you will need to fill out IRS Form 709 which can be found by clicking the button below.