Parents can give up to $14,000 in money or property to each child without paying gift tax as of 2015, reports the IRS. Parents can also give unlimited tax-free gifts for educational or medical needs as long as the money goes directly to the appropriate institutions, states CNN Money.Continue Reading
Any transfer of assets that is not fully recompensed counts towards the gift tax exclusion, according to the IRS. Property given to children is assessed at fair market value, not forced sale price. College funds put into a 529 educational savings plan instead of directly to the educational institute count towards the gift exclusion limit, as reported by CNN Money. The exclusion limit is renewed each calendar year, states Nolo. Parents can avoid taxes on large gifts to children by spreading payments over several years.
Children under 18 who receive large gifts must have either a state-authorized custodian or a trust responsible for the money, according to Nolo. However, to qualify for the gift tax exclusion, the custodian or trust must turn the assets over to the children at least by the time they turn 21. Passing gifts on to children while parents are still alive has the added benefit of reducing assets subject to eventual estate tax, reports CNN Money.Learn more about Taxes