What You Need to Know About the Annual Gift Tax Limit

September 21, 2015

If you’ve ever had questions about gifting and how much you should give, this post is for you. Here are five of the most asked questions we hear around making gifts.

Am I financially able to make a gift?

If you have the desire to make a gift to a family member or friend you need to first determine does your financial situation allow for you to make such a gift.
Having a financial planner assist you through this process can be very beneficial to you. They can help you see the larger picture and show you the impact the gift today will have on your financial situation many years down the road.

Is there any gift tax due? How does this impact my lifetime estate tax exemption?

The annual gift tax limit for 2015 is $14,000.

Gifts under this amount don’t have to reported and have no tax implications
This $14k amount reflects the limit to each person and if you take into account a married couple then the limit doubles to $28k using gift splitting. For example a single filer could gift up to $14k to an unlimited amount of people with no tax implications. If this single filer was married they could gift up to $28k to the same individuals with no tax implications.

How do I report and track the gift?

IRS form 709-filed by April 15^th of the year after the gift was made.
This form also keeps track of previous gift amounts above the annual limit which count against your lifetime estate tax exemption of $5.43m

What if I make the gift directly to the provider to pay for someone’s education or medical bills?

Gifts made directly can be above the $14k annual limit and no gift tax will be recorded. The gift must be made directly to the provider for the benefit of the giftee, but the money cannot go to the giftee first.
Making a contribution to a 529 account does count as a gift and the $14k gift tax limit does apply.

Can I make the same gift next year?

If you plan to make periodic gifts you should have a financial plan in place to provide the knowledge that gifting on a recurring basis is feasible given your situation.
Most clients financial situations are constantly evolving and they may not be able to make the same gift they had previously, therefore you should assess your current standing before making each periodic gift.

Cameron Hendricks

Cameron is a Partner and Certified Financial Planner™ with over 10 years’ experience in the financial services industry. With his Equity Compensation (ECA) designation, he specializes in helping employees and executives of technology and life sciences companies that have significant equity compensation. He is also a Certified Exit Planning Advisor (CEPA) for privately held companies on their path to and post exit.