Happy Sunday!

As we are coming up on the end of the year (can you believe it?!?) I thought I’d give you a little annual gifting reminder/prompt in case you are considering gifting to reduce your taxable estate.

Before we get there, a friendly reminder that Washington state has its own estate tax that starts at $2.2m – if you are married you can make that $4.4m with a specific type of trust (a credit shelter trust), but everything over that can face estate tax liability when you are gone.

Okay, let’s talk about annual gifting.

Federal law allows you to give away $18,000 to as many people as you want in 2024 without having to do anything.

No receipts.

No tax filing.

Nothing.

And, remember, if you are married this is $18,000 for each of you (so you can give a child, for example, $36k, $18k from each of you, and this rule still applies).

ADDITIONALLY, you can pay an unlimited amount for medical and educational expenses, so long as they are paid directly to the institution, and that will not count against your $18k annual gifting limit.

So, as you near the end of 2024 and are looking for things to do from a tax strategy perspective, this might be one of them.

Important note, and reminder, and clarification… this gift will NOT help you from an income tax perspective. We are talking estate taxes only for today.

Making sense so far?

Great.

Now, if you go over $18k in gifts to an individual in 2024, you are NOT going to have to pay tax on the overage.

All you are going to need to do is file a gift tax return when you do your income taxes.

That tells the IRS you went over for the year, and they will reduce your LIFETIME giving amount by the overage.

So, for example, if you give $28k instead of $18k, you will file a gift tax return for $10k, and your lifetime exemption will be reduced from $13.61m to $13.60m (a reduction of $10k).

So, if you want to give more, it’s okay. You’d only face tax on gifts if you go over $13.61 in your lifetime (though this will change in the next couple of years, so be careful!).

That’s it.

A little tax strategy for you on this Sunday.

Hope this helps!

Have a great week!

Cheers.

Christopher Small
Founder/CEO
CMS Law Firm LLC

PS – don’t keep this estate planning stuff to yourself – you know it’s important and we LOVE referrals!