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Beware of Tax Penalties Before Giving Family Large Gifts

Are you planning to give family members gifts of money this year? Before you start wrapping the presents, you may want to consider the tax penalties.

Consider these important tips about tax penalties:

  • Gift tax rules: The gift tax states that you must report all gifts from family members if they’re $17,000 or more. The person who receives the gift will have to pay taxes on it.

  • Annual rule: The $17,000 refers to an annual amount. If you give less than this amount in one year, then they won’t have to pay taxes.

  • Exclusions: Paying a family member’s tuition for education doesn’t count as a gift. In addition, health expenses don’t count as a gift.

  • Rules for spouses: If you’re both citizens, then you can give each other any amount without tax penalties. However, if one partner isn’t a citizen, then the tax penalty applies.

Tax penalties can reduce the amount of the money you give as a gift. Consider the tax implications before making monetary gifts. Speaking to a tax professional can help you set up your gifts in such a way that you avoid these penalties.

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