This year, I will have been married for 25 years. To celebrate, I bought my wife a very nice piece of jewelry; I have never purchased anything this expensive for my wife before (if you do not count our house and cars). My friend has advised that I will need to pay gift tax on it because it costs more than $10,000. Is he correct? I thought that only the rich paid gift taxes.
First of all, congrats on 25 years! That’s a terrific milestone.
Second, relax. Tell your wife to enjoy her jewelry – gift tax free!
Assuming that you are both US citizens, there is unlimited gifting between married persons (hubby, are you reading?). This means that you can give each other all of your worldly possessions during lifetime and pay no federal gift tax.
It’s also worth noting that the gift tax exemption is no longer $10,000. It’s $12,000. It is adjusted for inflation each year.
As to your point about the rich paying gift taxes? Well, sort of. Every person can gift $12,000 per person per year with no gift tax consequences. So you can give one person $12,000 or a hundred people $12,000 – it makes no difference. Additionally, married persons can combine their gift tax exemptions and make a combined gift of $24,000 per person per year (though you need to file a gift tax return in order to do this).
If you gift more than this amount in the aggregate (it’s per person not per gift), you would be subject to gift tax on the overage. The donor, not the donee, pays the tax.
Gifts to children are still gifts. This includes cars, college tuition and yes, even Christmas and Hanukkah presents.
Exemptions include medical expenses and college tuition paid directly to the institution by the donor.
So, that’s the scoop. There’s no need to worry about any gift tax consequences (again, so long as you’re both US citizens). Have a fabulous anniversary!
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation. Have a question? Ask the Taxgirl!
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