Make sure THAT GIFT doesn’t Cost you more than Counted on

In an effort to keep taxpayers from transferring wealth from one generation to the next tax-free, there are specific limits to the amount of gifts one may give to any one person each year. Amounts in excess of this limit are subject to filing an annual gift tax form. For most of us, this is not something we need to worry about, but if handled incorrectly, it can create quite a surprise when the tax bill is due.

The Gift Giving Rule. You may give up to $17,000 (up $1,000) to any individual (donee) within the calendar year 2023 and avoid any gift tax filing requirements. If married, you and your spouse may transfer up to $34,000 per donee. If you provide a gift to your spouse who is not a U.S. citizen, the annual exclusion amount is $175,000 for 2023.

Gift Tax Reporting.

Amounts given in excess of this annual amount are subject to potential gift tax reporting. The amount of tax is currently unified with estate taxes with a maximum rate of 40 percent. The donor of the gift is responsible for paying any associated tax. When you exceed the annual gift giving amount, this triggers the need to file a gift tax form with your individual tax return. The excess gift amounts are netted against your lifetime unified credit. If your lifetime gifts do not exceed the credit, you may not have additional taxes owed. Here are some instances when a gift tax problem may occur and ways to manage the problem.

Gifts for college.

Grandparents like to help with the tremendous expense of funding a college degree and amounts donated can quickly surpass the annual gift threshold. To avoid the gift tax problem, consider making payments directly to the college as this form of payment can be excluded from the annual gift giving limit AS LONG AS the funds are not used to pay for books, room or board on behalf of the donee.

Be careful with 529 plan funding.

If your children are anticipating going to college, many consider creating a 529 college savings plan. You may then fund the savings plan (or have someone else fund it) on behalf of your child. However, remember the deposits into 529 accounts are considered a gift and are subject to the annual gift giving limits.

Gifts to cover medical expenses.

It is very easy to mount up a large medical bill. While you may want to step in and help by giving money to the individual with the medical bills, you may be creating a gift tax obligation. Make payments directly to health care providers for medical services on behalf of the patient to avoid gift tax exposure.

Gifts to help make a down payment.

It is becoming more common to have family members help their kids with the down payment on a first home. This can be tricky. Lenders will look for recent deposits in bank accounts and ask the prospective buyers to substantiate the source of funds. Providing the funds as a loan may disqualify the couple for taking on the mortgage. Even worse, if the purchasing couple claims the funds are a gift, this action may create a gift tax obligation to the person providing the funds. Care must be taken to provide the correct audit trail to prove the gift does not exceed the annual amounts.

Gift of real estate.

If you give property to a relative for little or nothing in return, this generates the need to file a gift tax form as well. Recent IRS studies suggest more than 50 percent of taxpayers fail to declare property transfers as gifts.

Other things to consider

You may provide gifts to or receive gifts from ANYONE. There are no limits or restrictions on who you may give a gift to or who may provide a gift to you. Creative gift giving can be a useful tool to help someone in need without creating a tax obligation. Do not give a lump sum gift for the maximum amount.

If you provide a gift for the maximum allowable to an individual, you may not provide any other gifts to this person during the year, or the event would be deemed excess gift giving and require filing a gift tax form. For example, a grandmother gives $17,000 to her granddaughter for college. She also pays for a vacation trip to send the family to Disney World and provides a wonderful birthday gift. Technically, the additional gifts are in excess of the annual limit and would present a gift tax event.

The IRS is paying attention to the massive non-compliance in the timely filing of the annual gift tax form. So much so, that it is actively researching property transfers in key states to ensure the gift tax filing is taking place. So, identifying when to file the gift tax form is your most important takeaway from this tax tip.

Cities are wonderful and exciting places. Whether you commute daily for work, visit occasionally for cultural events, or live inside a metropolitan area, you would most likely agree that the city offers something for everyone. However, the city can also create an environment that fosters crime. Because metropolitan

Safety At Your Apartment

Respect your building’s access control system. Don’t prop open secured doors or let people you don’t know into the building, even if they claim to live there or tell you they are visiting someone. Notify your landlord immediately if a light bulb needs to be replaced in the hallway, stairway, storage room, or laundry. Intruders may use the darkness in those remote locations to lie in wait for solitary victims.

If you must put your name on your mailbox, try to use your first initial only. An attacker may be able to gain access to your building by convincing you or your neighbors he/she knows you and needs to come in for a legitimate reason.

If an intruder breaks in, try to leave your apartment safely and contact the police from another location. If you cannot leave, lock yourself in a room with a phone and call the police.