Please explain the exclusion for gifts to a child.
August 15, 2011
From: Kevin
Date: Sun, 14 Mar 2010
Subject: transferring stock
Please explain the exclusion for gifts to a child. Is it an income tax exclusion?
Thanks
Answer
Date: 9 Apr 2010
Hello Kevin,
No. True gifts without a business connection aren't subject to income tax. There is a separate federal gift tax, and some states may also have gift taxes. For 2009 and 2010, up to $13,000 of gifts to each individual from each individual are exempt from gift tax so you and your spouse can each give up to $13,000 to a child each year. The gift must be a "present interest," such as a cash gift to uniform "gifts to minors" account.
There is a lifetime exemption equivalent of up to $1 million of taxable gifts, so most people don't pay gift taxes for lifetime transfers. A gift tax return is supposed to be filed by April 15 of the next year when a taxable transfer is made.
Good luck!
Mike Gray
For answers to new questions, subscribe to our newsletter, Michael Gray, CPA's Tax & Business Insight by filling out the form below.
Home Newsletter Archive Introducing Michael Gray, CPA Articles Tax FAQ Need Help? Other Links
Find us on Facebook
Follow me on Twitter
Connect on LinkedIn
Connect on Google+
Our Blog