Then it’ll be treated as a gift that’s spread over the next five years at $15,000 per year. This means that you can make a gift of $75,000 ($150,000 as a couple) in one year, as long as that gift goes directly into a 529 plan. Currently, tax laws allow you to spread out a contribution to a 529 plan over five years. There’s another education-based exception to paying tax on monetary gifts.

However, if you give a $50,000 check to a friend so that they can pay their college tuition, you’ll be subject to the gift tax for being over the $15,000 exclusion because you’re giving the money to the individual and not making a payment directly. For example, if you want to give a gift of college tuition or covering medical bills, you can do so tax-free if you pay the institution directly. Keep in mind that you can technically give tax-free monetary gifts over the exclusion amount, depending on how you do so. If you do, this can affect your estate plans after your pass away. Don’t lose track of the lifetime gift tax exemption by ignoring gifts of real estate and other non-monetary assets. While it’s a bit easier to keep track of monetary gifts and keep them under the annual exclusion, remember that other types of gifts factor into the lifetime exclusion. Even if you go over the annual exclusion, you won’t owe gift taxes until you hit the lifetime exclusion. If you stay under the annual exclusion amount, you won’t have much to worry about. However, those taking advantage of the current gift tax limit won’t be adversely affected when the limit decreases once again.Īs a result, avoiding taxes while giving monetary gifts is a lot more straightforward than you might think. Note that the lifetime exclusion will drop to $6 million in 2026. You’ll just need to file a return so that the IRS knows if you’re beneath the lifetime exemption. But if you stay beneath that lifetime limit, you won’t actually owe any tax on gifts above $15,000 each year. If you eclipse that, you’ll owe taxes of up to 40%. There is a lifetime gift tax exclusion that currently sits at $11.7 million. If you’re going to give a monetary gift over the gift tax exclusion limit of $15,000, you’ll need to file a return with the IRS. So a married couple can give up to $30,000 in tax-free monetary gifts to as many individuals as they want, including children. Married couples can give gifts on behalf of themselves as a unit, doubling the exclusion. It’s also important to note that the rules vary slightly for couples. You can give money any way you like, whether that’s by cash, check, gift card or any other medium. Giving monetary gifts under the gift tax exclusion is pretty straightforward. That means you can give up to $15,000 in monetary gifts to as many people as you want without needing to file a return or pay taxes on it. This exclusion currently sits at $15,000 per person, but is subject to change year over year. This is largely due to the IRS gift tax exclusion. It’s a little anticlimactic, but most of the monetary gifts you give are unlikely to need any second thought from a paperwork or tax perspective.

Monity gifts