Maximum Gift Without Tax for 2012

Up until this junction, you may or may have not known that there is a tax imposed on gifts. Gifts!! Lets not get carried away though, this law was supposedly created with good intentions along the lines of preventing some people from cheating their fair share of taxes, right? I think so. But what’s the maximum gift without tax? Well in 2011 that is $13,000 (we are talking about here in the United States) for single tax filers and $26,000 for those filing jointly.

So what makes a gift a gift in the eyes of the tax-hungry IRS? For these purposes, the gift tax is imposed on gifts to non-charitable. The maximum gift you give for your lifetime is five million dollars!

You should know that the recipient of the gift won’t have to pay the tax, it’s the giver. In this case the giving and receiving have different advantages. If you give the gift to a spouse, then it will not be subject to taxation. The financial advantages of being married are significant. Sort of like how your spouse isn’t required to testify against you.

It should also be noted that gifts of “future interests” do not qualify for the annual exclusion.

But gifts used to pay education and medical expenses do qualify under an unlimited gift tax exclusion. These funds need to be directly paid to the medical or educational institution in order to be exempt from taxes.

One of the biggest advantages of gifting assets to people is that their future worth is not subject to the taxes that the gift will be at the time it was gifted. Meaning; the appreciation of worth itself will not be included in your estate.

Be sure to do your homework, because some states have laws that discourage or even prohibit giving gifts to minors. The state may require supervisory requirements to make sure that the gift isn’t recklessly squandered. If a minor is receiving income from a property that was gifted to them, the “kiddie tax” says that their income will be taxed at their parents income tax rate until the minor turns 18.

Though we don’t have enough time at present, it would behoove you to look up what are called present-interest trusts, crummey  trusts, and totten trusts. I am personally unfamiliar with all three.

So if you gave less than $13,000 during the year for which you are considering your income tax return, then you will not have to file a gift tax return. Also, the gifts you did give were present interests.

But if you gave more than $136,000 to your spouse who is not a US citizen, or if you made a qualified terminable interest property election, or if you gave more than $13,000, or if you elected to split gifts with your spouse, then prepare to file a gift tax return.

If this article doesn’t satisfy every aspect of the maximum gift without tax for you, then head over to TurboTax and browse their site by “gift tax” to read what real life tax professionals and tax filers had to say about their own experiences with the gift tax limit.