Are you aware that the IRS allows you to make an unlimited number of small gifts each year, free of gift tax? You can give up to $12,000 each to any number of people in 2007 and none of the gifts will be subject to gift tax. Under current law, you can make gifts to anyone. This means that you can give to your children, grandchildren, friends,and even total strangers.
For example, if you have two children, you can gift up to $12,000 to each child, each year, without incurring any gift tax. If you are married and you decide to combine your gifts, you can gift a total of $48,000 to your two children this year free of gift tax.
Lifetime gifting can reduce the size of your estate at your death and thus potentially reduce estate taxes. The annual gift tax exclusion lets you assist loved ones who currently need funds for things such as a down payment on a new home, tuition or a new business.
Some types of gifts have an unlimited annual exclusion amount. Payments made directly to an educational institution for tuition or payments made to a health care provider for medical care are not subject to gift tax. Gifts made to a spouse or political institution are also not subject to gift tax.
There are no carryover provisions for the annual gift tax exclusion. An unused exclusion from 2007 may not be used in a future year. Leverage your gift giving by taking advantage of the fact that it is an annual exclusion.
For more information, please contact Lisa S. Golshani, Attorney at Law, 27240 Turnberry Lane, Suite 200 in Valencia, at 661-362-0770.