Christmas Tax Write-Offs: Tax on Gifts
It’s the time of the year when the streets look very beautiful as snowflakes fall on them. Parties are being planned, holiday reservations are being made, families are gathering together, and everyone is preparing for loads of fun.
It’s Christmas and the season is never complete without giving; it’s a time for packing gifts. The fact that it’s ushering in a new year makes giving the order of the day. No one enjoys paying taxes, and the idea of a write-off always brings smiles to faces. In this season of giving, it is a great relief to know that Christmas write-offs like annual gift tax exclusions apply. One would entirely agree that having a write-off on the number of gifts you are sending out this season would amount to some effective and pocket-friendly giving.
When it comes to giving in a tax-wise manner this season, the best way to go about it is to gift property or cash to your family, friends and loved ones. Give out gifts that are covered by the gift tax exclusion, and you are safe. Such gifts even save you the stress of filing a gift tax return. Generally, if the cash gift is worth $15,000 or less, you don’t get to file a gift tax return. Since the annual gift tax exclusion for 2018 and 2019 is $15,000 as well, it helps you attain that height of killing two birds with one stone.
Also, each time you gift assets, your taxable estate gets reduced. In addition to giving to loved ones, on the other side of the cliff, you’d be saving the family member or friend some money as they would get charged with tax on a gifted item at a reduced rate.
The only condition tied to gifting your loved one's assets is that you lose up to all connections to the asset once you give it up.
However, so long as it stays within the accepted federal gift tax exemption limit of the United States government, you’re good to go on your tax write-off this Christmas.
One would wonder what $15,000 would do regarding reduction on a taxable estate. Why not think of it this way?
Imagine a family gifting $15,000 to 15 children and grandchildren as a whole; the gifts would be worth a total of $15,000 multiplied by 15 recipients ($15,000 x 15). This gives a total of $225,000 per annum. Now, that’s significant!
Isn’t it amazing to know that grandparents can easily pay their grandchild’s college tuition bill asides gifting them $15,000 both in December and January without any tax being incurred? The same applies to medical bills too. Christmas tax write-offs are undoubtedly the best as they save you from expenses all holiday long!
Couples also get to enjoy the advantage of pairing up to give gifts worth up to $28,000 ($14,000 x 2) together.
Some special cases of giving in this season also exist. In a case where you decided to get involved in charitable giving to a public charity (as in the case of donating real estate to a public charity), ensure you deduct the fair market value (FMV) price of the asset. This way, you’ll be deducting every untaxed appreciation on that property.
Giving makes brings joy to the heart, but giving in a pocket-friendly manner brings more joy. Have a Merry Christmas!