Definition of 'Gift Splitting'
There are a few things to keep in mind when using gift splitting. First, the total amount of gifts that can be given in a year without incurring any gift tax is $15,000 per person. This means that if you are married, you can give up to $30,000 to each of your children without having to pay any gift tax. However, this limit is per person, not per gift, so you could give one child $10,000 and another child $5,000, and still stay under the limit.
Second, the gift tax is not due until the gift is actually made. This means that you can make a gift now and then wait until the following year to file the gift tax return. This can be helpful if you are expecting a large income increase in the next year, as you can use the gift tax exemption to offset the higher taxes that you will owe.
Finally, it is important to remember that gift splitting does not avoid estate taxes. If the person who made the gift dies within 10 years of making the gift, the gift will be included in their estate for estate tax purposes. This means that the gift tax savings that were achieved by using gift splitting could be offset by the higher estate taxes that are owed.
Overall, gift splitting can be a useful strategy for reducing the amount of gift tax that is owed. However, it is important to understand the rules and limitations before using it.
Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.
Is this definition wrong? Let us know by posting to the forum and we will correct it.