How Do You Gift Money to Family Members Tax Free?
A person can gift money to a family member without paying tax by not exceeding the basic exclusion amount, notes the official web site of the Internal Revenue Service. The basic exclusion amount is a lifetime limit that is used in gift tax and estate planning.
There are two limitations to consider when sending money to a family member: the annual exclusion and the basic inclusion. If a person gifts an amount that exceeds the annual exclusion, he must complete form 709 and attach it to his tax return, notes Forbes. In addition, any amounts gifted that exceed the annual exclusion impact estate tax planning as well, as stated by Finaid.org. A person gifting money to his spouse is exempt from any gift tax reporting requirements.
The basic exclusion is used to determine when a gift becomes taxable. The Internal Revenue Service periodically reviews this exclusion and modifies it as necessary. More information on this exclusion, including the amount and the associated tax rates, can be found on the official web site of the Internal Revenue Service. Gifts that are made to a 529 college savings plan are treated separately since there is an educational purpose, notes TurboTax. In addition, gifts to IRS-approved charities and certain medical expenses are tax exempt.