As of January 1, 2022, you can give up to $16,000 per year, per person without reporting to the IRS and without gift taxation. So, for example, if a married couple with three children wanted to give the maximum to each child, then they could give up to $96,000 ($16,000 x 3 by the husband and $16,000 x 3 by the wife) in year 2022 without reporting to the IRS.
If one gives more than $16,000 in a year, the donor (not the one receiving the gift) has a duty to report. However, that doesn’t mean the donor has to pay a gift tax. As of January 1, 2022, a person (the “donor”) can give, without gift taxation, up to the whole amount the donor is allowed to give at death without estate taxation. If one dies in year 2022, the amount that can be passed without federal estate taxation is increasing from $11.7 million (in year 2021) to $12,060,000 as of January 1, 2022. So, if a married couple wanted to use both of their full exemptions in year 2022, they could give $24,120,000 in year 2022 (assuming they haven’t given more than the annual gift tax exclusion in prior years). The estate tax exclusion is scheduled to be reduced to one-half of the 2025 estate tax exclusion amount as of January 1, 2026.
Although there is no limit to gifts between spouses if they are U.S. citizens, if one spouse who is not a U.S. citizen receives a gift from a U.S. citizen spouse, the gift without taxation is limited to $164,000 in year 2022. Annual gift tax exclusion is not applicable to transfers in connection with means-tested public benefits such as Medicaid.
If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming virtual Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.