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Let Us Clarify Gift Tax!

The Gift + Estate Tax. There is a lot of confusion about how the gift tax works. Essentially, if you

gift money to another individual, you can give up to $17k (for 2023) as an individual or $34k (for 2023) as a married couple without needing to file a Gift Tax Return.

A Gift Tax Return is filed to inform the IRS of amounts of gifts that go toward your Estate Tax Exemption. The current federal Estate Tax Exemption is $12,060,00 (for 2023, and double that for a married couple). This means that upon your death, the first $12,060,000 of your wealth (income + assets) are not taxed. Anything above that is taxed at 40%.

Anytime you file a gift tax return, that REDUCES your exemption amount. So if you gift $100k in a single year to an individual, your new federal Estate Tax Exemption is $11,960,000.

Another thing to keep in mind - unless current tax law changes, the Estate Tax Exemption will sunset at the end of 2025 and go down to around $7,000,000 per individual.

I was speaking with a high-earning client this past week, who will be blowing past those exemption amounts by the time they retire. One easy strategy to implement now is through the gift-giving to their young children into a brokerage account under the gift tax threshold. For each child, they can contribute $34k per year (as a married couple)in this account for them, as long as they’d like, and start to help build wealth for the next generation and move income away from their estate tax.

Contact us now and we'll help you get started! : 808.546.5026 ext. 303 or!



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