It may come as a surprise to some that, under the Internal Revenue Code and related authority, gifts are ordinarily taxable.
However, the IRS provides an annual exclusion, regularly indexed for inflation, under which gifts of a lesser value need not be reported. In 2023, the value of gifts that can be made to an individual without a reporting requirement is $17,000.
Similarly, an individual may, over their lifetimes, give a certain amount of gifts without tax consequences. Starting in 2023, an individual may give away a total of $12,920,000 in gifts over their lifetime, tax free. This $12.92 million dollar includes gifts made above the annual exclusion of $17,000.
For example: In January of 2023, an individual gives away $17,000 each to Friend 1 and Friend 2. In December of 2023, the individual gives Friend 1 and Friend 2 an additional $10,000 each.
The initial $17,000 gifts are not required to be reported under the annual exclusion. However, the individual must file a gift tax return reporting the subsequent $10,000 dollar gifts, which are above the $17,000 annual threshold. The $10,000 gifts are still tax free, but the individual’s lifetime exclusion will be reduced by $20,000.
Those who give gifts at or near the annual threshold of $17,000/recipient should be cognizant of IRS updates to the annual and lifetime exclusions. More information can be found at Rev. Proc. 2022-38 (Oct. 18, 2022).
Or you can call us at +34 915194392, write us at email@example.com or book an appointment thru our website.