Ask an Advisor: How Much Can I Gift My Son and Daughter-in-Law Without IRS Tax Issues?
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For 2023, you can give your son and daughter-in-law each $17,000 without having to deal with the IRS. But even if you give more, you won’t have to pay any taxes right now. In fact, unless you surpass the lifetime limit, currently around $12 million, you won’t have to pay any gift taxes.
The gift tax is a federal tax that may be imposed when you give someone property or money, and they don’t give you something of equal value in return. The IRS sets limits on how much you can give other people each year and over your lifetime. If you give more, you could end up owing taxes, but not until you cross the lifetime limit.
Gift tax rates are steep, starting at 18% and topping out at 40%. The person giving the gift pays the tax. (A financial advisor may be able to help you navigate the tax consequences of your gifting strategy.)
The annual gift limit usually changes every year. For 2023, the limit is $17,000. That means you can give anyone up to $17,000 without having to deal with the gift tax.
There’s no limit on how many people can receive your gift. So you could hand out $17,000 to 10 people and not trigger any annual gift tax issues. You can also give the same person up-to-the-limit gifts every year with no tax implications.
If any gift exceeds the annual limit, you’ll file a gift tax return on IRS Form 709. This is purely an informational return with no tax due until you cross the lifetime limit of $12,092,000 (for 2023). Only the excess portion of the gift starts to whittle down that lifetime exemption. For example, if you gave your niece $20,000 in 2023, you would file a gift tax return and deduct $3,000 of that from the lifetime exemption.