Many people think that if you make a gift larger than $16,000 (prior to 2022, this amount was $15,000), you have to pay taxes on that gift, but for most people the answer is that you don’t owe any taxes.
Under current federal law, a person can make up to $12.06 million in gifts before they owe any federal gift taxes (Washington state doesn’t have a gift tax, so no taxes here either, but if you’re in another state, check your local laws).
So, where does the $16,000 figure come in? If you give less than $16,000 to any person in a year, that gift doesn’t count against the $12.06 million exemption. Gifts larger than $16,000 do count, and you have to file a gift tax return to tell the IRS how much of your $12.06 million exemption you’ve used. You won’t owe any taxes until you hit $12.06 million, but the IRS wants to know how close you are to the cap.
Stephen King
The Eastside's Estate Planning Attorney
Talis Law PLLC is a small Estate Planning firm on the Eastside. We work with people to help them understand what goes on during the estate planning and the probate process. Our firm offers flat fee services so clients feel comfortable asking the questions they need to understand what their documents mean, and what the process does.
Disclosure: While I am a lawyer, I am not offering legal advice. Posts on legal matters are intended to provide legal information and do not create an attorney/client relationship.