Generosity Pays: Estate and Gift Giving
What are the Benefits of Gifting?
Besides that warm, fuzzy feeling one can get from giving to another, gift exchanges are typically not subject to taxation, presenting an attractive way to support another person or organization. Recipients are also never subject to taxation as a result of accepting a gift.
Currently, there are two main categories of gift giving that require zero reporting: gifts to an educational institution on behalf of a family member/friend and any gift that funds medical expenses, such as insurance premiums or doctor’s visits, as long as they are paid directly to the provider. These are particularly appealing as they have zero restrictions on the amount being given in a year when traditionally only gifts that fall below the current annual exclusion amount are exempt from any type of reporting.
What Kinds of Gifts are Taxable?
Gift tax returns are applicable when a gift’s monetary amount exceeds that year’s annual exclusion amount. Reporting a large gift to the IRS, however, doesn’t mean it will be taxed. Only those gifts that are higher in value than is typical are taxed. To ensure that gifts are reported properly, it is important to note that anything of value that is not cash must be appraised by a professional in order to be reported. This can include property, business ventures, and high-value objects.
When it comes to gifting, proper reporting is essential. Since gift tax forms are complex and cumulative over your lifetime, we recommend working with a CPA to ensure accuracy and compliance. Keeping track of all gifts given is crucial, as these reports can significantly impact your estate tax.
Gifting itself can range from the simple cash transfers discussed above to more complicated approaches that offer long-term financial benefits. Some families use loans as a strategic way to transfer wealth—parents may lend money to their children for a home or business, with the loan eventually being forgiven and treated as a gift. More advanced strategies include trusts, which allow for controlled asset distribution, and charitable gifts that provide benefits to both family members and philanthropic causes. These complex methods require careful planning and professional guidance to align with tax laws and broader financial goals.
What is the Estate Tax?
The Estate tax, or the “death tax” as some call it, is the total value of one’s assets when they die. Most taxpayers will not have to worry about such a tax, as the 2025 annual exclusion amount is around $14 million dollars. For those who do, however, it is imperative to know that the estate tax—currently 40% on assets above the threshold amount—will be imposed. Gifting can be utilized to circumvent this tax, as gifting reduces that $14 million amount. It pays to be generous!
Taxes can be difficult to navigate, but Hantzmon Wiebel is here to help. We can assist you in remaining compliant with the IRS’s guidelines. Learn more at https://www.hwllp.cpa/tax
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Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.
