Make sure you file a gift tax form on any 'gifts' over $14K a year
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Something I've just recently had to deal with is filing a form for gift taxes. For those unaware, since I just got my research on, allow me to enlighten:
Basically, and I'm really over-simplifying here, but this is the jest -- an individual is allowed to 'gift' any other individual (adult or child, doesn't matter) up to $14,000 a year. That's per person. So you can 'gift' 10 someones $14,000 a piece every year, and not have to worry about filing for a gift tax at all, ever. But once you exceed that yearly limit, you have to file.
And to clarify, for tax purposes, a gift is a transfer of property (money or real estate) for less than its full value. In other words, if you aren't paid back, at least not fully, it's a gift.
This can seriously come in handy when transferring estates (houses or other property) to avoid steep appreciation values due to estate tax rules. But otherwise, it's basically just a way for the IRS to keep tabs on how much money transferring you do in a lifetime. Exceed the limit, and you will have to pay the gift tax.
Finally though, the best part of researching this concludes for me that I will likely never have to worry about it. Even if you exceed the $14K limit in a year to a single person, you are allowed a lifetime of $5.43 million to gift, before you ever have to worry about the 40% tax. Even still, when you exceed that yearly limit, you HAVE to file, hence the lifetime bit. Yes, the IRS keeps tabs on your tally, for LIFE. Kinda sucks for me, but I get it. That's a big allowance, so it's whatever.
Anyways, hope that helps anyone wondering how gift taxes work. Ohh... the form you have to file, and make sure that you do if you exceed the limit! Here: