How to Leverage Your Marriage to Avoid Paying Gift Tax

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Ahead of the holiday season, it’s important to know how to avoid gift tax on gifts you might give this year. The exclusion for 2021 is $15,000 per beneficiary in one year. This means you can gift someone up to $15,000 without paying gift tax. Anything over this amount will be subject to tax.

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A smart way to increase this amount is to donate with your spouse. Even if the couples file jointly, the gift tax exclusion applies to each partner separately. This means you can give up to $15,000 in gifts per spouse per beneficiary. As a married couple, that translates to $30,000 per gift to one person. If couples choose to engage in this practice (called gift sharing), they should review IRS Form 709 to see if they are required to file it.

Married couples can make a gift or gift to multiple recipients per year, as long as it falls within the $11.7 million lifetime federal gift or estate tax exemption ($23.4 million dollars for couples).

The lifetime exemption means couples can give up to $23.4 million in total, to all beneficiaries, over their lifetime — without having to pay federal tax. Using the lifetime exemption alongside consideration of annual exemption limits can be an easy way to distribute wealth among family members while avoiding unnecessary tax payments.

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Taking advantage of your marital status can benefit the children and/or grandchildren to whom you wish to bequeath large sums, without being taxed additionally.

The best thing to do is consult your tax professional if you think you may be hit with taxes by giving gifts this year. Most couples won’t have to worry, but it’s possible to leverage your marital status to transfer wealth to other generations – without any federal taxes involved – if you do the right way.

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private banking and investment research. Georgina has written for Investopedia and WallStreetMojo.