For starters, you can give gifts valued up to the annual gift tax exclusion amount each year without ever touching the lifetime exemption. For 2017, the exclusion was $14,000 per recipient. In 2018, it increased to $15,000 per recipient.

The federal gift tax applies to the giver of a gift, not the recipient, for amounts above a specified level. Most gifts are sheltered from gift tax by the annual gift tax exclusion and the lifetime gift tax exemption (or both).

The annual gift exclusion is available to each taxpayer. If you’re married and your spouse consents to a joint gift — also called a “split gift” — the annual exclusion amount is effectively doubled to $30,000 per recipient for 2018. 

Example 1: A taxpayer with four children can gift $15,000 to each child for a total of $60,000 without having to file a gift tax return. If the taxpayer is married, each spouse can gift $15,000 to each child, for a total for the couple of $120,000, without having to file a gift tax return.

Example 2: A single taxpayer has one child, a son. In 2018, he gives the son $20,000 to use for a down payment on a home he is purchasing. Because the gift was more than $15,000, the taxpayer needs to file a gift tax return. As long as the amount of the cumulative gifts made by the taxpayer during his lifetime that have exceeded the annual gift tax exclusion amounts in the current and other gifting years is less than $11,180,000, the generous dad won’t be liable for any gift tax on his 2018 gift tax return.

Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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