Giving financial gifts to your children can make their day, week, or even their year depending on how much you give them. However, it is not a total loss to you either. The Internal Revenue Service, IRS, offers taxpayers a gift in return. There are several rules to this money so before you gift money or property expecting a thank you from the government, you will want to make sure you fully understand the gift tax limit rules.
Is There a Minimal Limit
The first thing to know is there is a minimum amount of money or value you must gift in order to qualify for the gift tax. The first 13,000 dollars is excluded and is considered non-taxable. However, anything after that will require you to fill out a gift tax form when filing taxes. This applies to each person as well. Therefore, if you give 24,000 dollars to one child, and 25,000 dollars to another that is not for school or medical purposes, then only 23,000 dollars is considered a taxable gift.
What is a Unified Credit?
A unified credit is a credit that will reduce the amount of money you pay taxes on such as the gift tax. The amount of the unified credit varies annually. The IRS offers a chart to help people figure out what their taxable portion is. Before 2011, it was only 330,800 dollars; however, it jumped to nearly two million dollars in 2011.