Tis the Season of Giving: Some Basics to Guide You
Thankfully most gift giving is a tax-free event but if you are one of the lucky few who is able to give big, here are some tips to avoid pitfalls and receive the maximum deduction:
Contributions to eligible charities in the form of money or property are deductible as charitable gifts only if you itemize your deductions on your tax return. All deductions must be properly substantiated but there are stricter requirements for money or property totaling $250 or more. Usually a bank record or receipt showing the amount of the cash, date of the contribution, and description of property will be adequate. If your total deduction for noncash contributions for the year is over $500 then you must complete and attach IRS Form 8283 to your return.
Gifts to Family and Friends
Other than charitable gifts, any individual can give another individual up to $14,000 (the annual gift exclusion amount through 2016) tax-free. So married couples can give a combined gift of $28,000 to as many people as they want without paying any taxes. Gifts exceeding this amount may require a gift tax return so I recommend seeking professional advice to structure such a gift.
Lastly, tuition and medical expenses (including health insurance premiums) are not taxable as long as you pay the institution(s) directly. And you don’t have to worry about gifts to your spouse because those are also tax-free!
Call Lynn Girvin today to learn more about gifting opportunities. (949) 387-8707