Year-End is a Good Time for Gift Planning

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Dec 01, 2016

Are you ready for the gift-giving season? The time may already have arrived, at least from a tax perspective. Between now and December 31, you can take advantage of this year's gift tax rules as part of your year-end planning.

Here are two ways to transfer assets.

The annual exclusion. The annual exclusion is the amount you can give to anyone, free of gift tax, each year. For 2016, the annual exclusion is $14,000. You and your spouse can combine your individual annual exclusions and make gifts of up to $28,000 to a single recipient.

Some gifts have special rules. For instance, education and medical expenses that you pay directly to the respective providers do not reduce your annual exclusion.

As the name suggests, the annual exclusion is a use-or-lose tax break that expires on December 31 of each year. For 2017, the annual exclusion remains $14,000.

The lifetime exemption. The lifetime exemption is the total amount you can give away during your lifetime without paying gift tax. For 2016, the lifetime exemption is $5,450,000. When you are married, you can double the exemption, to a maximum of $10,900,000. Note that the lifetime exemption is "unified" with the estate tax exemption. That means the amount you use for gifting will reduce your estate tax exemption.

Gift-giving is a valuable estate planning tool. Please call the accountants and advisors at Terry Lockridge & Dunn and World Trend Financial to schedule an appointment for discussing these or other types of giving, including charitable gifts and gifts made in trust. We can be reached at 319.364.2945 in Cedar Rapids and 319.339.4884 in Iowa City.



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