February 5, 2016

Tax-Free Gifts

  • Every individual is entitled to gift up to $14,000 (unchanged since 2013) per year to any other individual(s) free of federal gift taxes. 
  • A married couple can join together to make tax-free gifts of up to $28,000 (even if this amount comes from only one spouse's assets). 
  • The annual gift tax exclusion can also be used to contribute to qualified tuition programs (529 plans). Due to special rules for 529 plans, contributions to these plans exceeding the annual gift tax exclusion amount may be carried forward for up to five years. 
  • The current lifetime gift exclusion for each individual is $5,450,000 and is exclusive of the $14,000 per year exclusion referred to above. 
  • In addition to the annual and lifetime exclusions, an unlimited gift tax exclusion is allowed for amounts paid on behalf of an individual for permissible educational and medical expenses; however, these payments must be made directly to the educational or medical institution. 

 

Charitable Gifts

If you are planning on making charitable gifts, we generally suggest that you use appreciated securities wherever possible. If you do decide to use appreciated securities, you are allowed a charitable deduction based on the full market value of the gift and will avoid a possible future capital gains tax, subject to certain limitations.

There are also charitable funds that accept contributions of marketable securities allowing you to base your deduction on the full market value of the gift in the year of transfer. You may then direct the proceeds from the gift to your charity, or charities, whenever you choose, even in a different year. Please speak with your counselor about how to best structure your philanthropic goals for 2016.

Download Article: 2016 Tax Guidelines on Gifts

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