How Much Can I Give Tax-Free Every Year?

Many clients that I work with want to begin gifting to their children and grandchildren. I love helping with this transition because it allows them to see the benefits of their gift instead of waiting to pass on an inheritance until after they are gone. The gifts can also be timed to help during pivotal moments in their lives, such as weddings, down payments, and college costs.

But exactly how much can you give without incurring taxes? In 2022, you can gift $16,000/per year per person without having to fill out a gift tax form. If a child is married, you could gift that amount to each spouse for a total of $32,000/year. For clean records, it is best to write two separate checks to separate the gifts between the spouses. In addition, if you are married, you and your spouse could each gift that amount to each of the spouses for a total of $64,000/year! However, if you do this, you are supposed to indicate a “split gift” on IRS form 709 on your taxes even though no taxes are due on this transfer.  

What most people don’t know is that they can give larger amounts without paying any taxes. That is because the lifetime gift tax exclusion is a whopping $12,060,000 in 2022! That means that you would have to give more than that during your life or at death to have any taxes to pay. This amount is in addition to the annual exclusion of $16,000.  

For example, if you decide to gift $50,000 to your child for a down payment, $16,000 goes tax-free to your child, and on form IRS 709 you claim the remaining $34,000 as a reduction to your $12,060,000 lifetime exclusion, leaving a cool $12,026,000 left to gift over your remaining life. So, while it does require an extra form on your taxes, you don’t have to pay any taxes for this gift.  

In addition, the gift recipient does not pay any taxes for gifts received.  

Thank you for reading, 

Alex 

This blog post is not advice. Please read disclaimers.