How Much Can I Gift My Children For Income Tax Purposes?

Thanks to increases tied to the cost of living, the government limit on tax-free gifts has increased from $10,000 per person a year in 2001 to the current $13,000.

What Is A Gift?

Anytime you give something of value and don’t expect something at least as valuable in return, it is considered a gift. This includes money as well as other types of property. Technically, all gifts are taxable, but there are exceptions. Gifts less than the annual exclusion for the year are not considered taxable, nor are gifts to your spouse, charitable organizations or charities.

How Many People Can I Give A Gift To?

While the limit per person for gifts is $13,000, there is no limit, other than a lifetime exclusion of $1 million, on how many people you may give gifts to. For example, if you have two children, you may give each child up to $13,000 free of tax liability. Your spouse may also give each child up to $13,000 tax free.

What Is Gift Splitting?

Gift splitting is when you or your spouse give a gift and agree to split the gift. Half is from you and the other half from your spouse. Together you may give someone a gift of up to $26,000 tax free. If you do split a gift, you’ll have to file Form 709 with your income tax return. This is true even if your gift is less than the $26,000 limit.

What If I Exceed The Gift Limit?

Form 709 is the income tax form used to report gift tax due. The instructions for Form 709 explain the situations where you may need to file a gift tax return.

One Response to “How Much Can I Gift My Children For Income Tax Purposes?”

  1. Joan B Safford says:

    In 2009, my husband and I gave cash gifts of $40,000 to son 1 and $19,000 to son 2, all gifts being paid from our joint bank account. This is the first year our gifts have exceeded the exemption amount.

    The IRS publication on Form 709 and other web guidance are very unclear about cash gifts from bank accounts held jointly by spouses. If all of the gift amounts came from a joint bank account (no separate gifts) and I sign the consent to split on my husband’s Form 709, do I also have to file a Form 709? If I do have to file a Form 709, how do I report the same gifts?

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