What are the tax implications of giving cash gifts to family? Is there a one time tax free option?

Asked almost 5 years ago - Sherman Oaks, CA

I will be selling my home soon and would like to split the profits with my mother and brother, but it will not be worth it if they have to pay taxes on what I give them.

Attorney answers (3)

  1. Franklin Moore Mclaughlin IV

    Contributor Level 10

    Answered . You can make annual gifts that are exempt from federal gift taxes of up to $13,000 per person per year. This amount goes up occassionally depending on inflation. You can also give gifts up to $3.5 million without paying taxes, but you will need to file gift tax returns. You also need to consider the tax consequences of selling your home. There could be an income tax resulting from the sale. You will also want to take into consideration any state taxes that could become due.

    You need to consider your overall estate planning. For example, if you are married or single will affect your planning. Whether you have a net taxable estate will affect your planning. You should consult with an experienced estate planning attorney to make sure you will not incur any unforeseen taxes. An experienced attroeny can make sure that your goals are met in the most cost-effective and tax-efficient manner.

  2. Henry Daniel Lively

    Contributor Level 20

    Answered . I agree with the previous answer, but the life time gift amount before you have to pay gift taxes is $1,000,000. You will receive the $13,000 annual gift exclusion. You could give part of the gift this year, and the rest of it next year to use the annual $13,000 exclusion twice. There may be some other more sophisticated techniques you can use if this gift exceeds your lifetime gift exclusion. You will need a competent tax attorney if that is the case.

    Disclaimer: This response does not constitute legal, accounting or other professional advice. Only through a personal, confidential consultation with qualified legal counsel can anyone properly evaluate their own unique estate planning challenges and determine what, if any, appropriate legal strategies and tactics should be implemented to meet those challenges.

    Circular 230 Disclaimer: “Nothing in this response is intended or written to be used, and cannot be used by any person for the purpose of avoiding tax penalties regarding any transactions or matters addressed herein. You should always seek advice from independent tax advisors regarding the same.”

  3. Randy Marvin Spiro

    Contributor Level 9

    Answered . First, the check must clear before the end of the year to be a valid gift that year. Second, the check needs to be deposited in an account in the name of the donee and the donor's name. Whether you make a cash gift or a non-cash gift, the annual free gift per donee is $13,000.
    The portion of the gift in excess of $13,000 per donee per year must be reported on a gift tax return, and it will be charged against the donor's $1,000,000 free lifetime giving amount. This same amount will also be charged against the donor's at death free giving amount ($3,500,000 in 2009). Lifetime gifts in excess of the $1,000,000 are subject to gift tax.

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