How much can parents gift children in 2019 tax free?

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atj520
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How much can parents gift children in 2019 tax free?

Post by atj520 » Sat May 11, 2019 5:49 pm

Hi,

My parents are going to loan or gift me $50,000 this year.

What is the maximum amount that they can give me in 2019? I have two parents, and am married. Can they give my wife and I only $15k tax free this year? Or is it 30k because it's two parents? Or can they give me 15k and my wife 15k? Lastly, does it matter if I pay them back within the year?

We live in California and folks live in IL in case it matters.

Thank you!

Swimmer
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Re: How much can parents gift children in 2019 tax free?

Post by Swimmer » Sat May 11, 2019 5:54 pm

They each can gift each of you 15k. So, total $60k without meeting reporting requirements. No requirement to pay a gift back.

jbuzolich
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Re: How much can parents gift children in 2019 tax free?

Post by jbuzolich » Sat May 11, 2019 6:06 pm

There are multiple articles and calculators online if you look around on this subject. No gift tax is due until some really large number is hit, such as over $11M given away by the parent beyond yearly exemptions. They might have to fill out a form with their return that year if they go over the yearly reporting limit but that's all, no tax exactly, just a form. If they can't be bothered with the one time form then they could structure the gift up to 4x the individual limit and gift that way. I think it was $15k so could gift $60k using splits. Parent 1 to you, parent 2 to you, parent 1 to your spouse, parent 2 to your spouse.

neilpilot
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Re: How much can parents gift children in 2019 tax free?

Post by neilpilot » Sat May 11, 2019 6:35 pm

atj520 wrote:
Sat May 11, 2019 5:49 pm
Hi,

My parents are going to loan or gift me $50,000 this year.

What is the maximum amount that they can give me in 2019? I have two parents, and am married. Can they give my wife and I only $15k tax free this year? Or is it 30k because it's two parents? Or can they give me 15k and my wife 15k? Lastly, does it matter if I pay them back within the year?

We live in California and folks live in IL in case it matters.

Thank you!
The federal estate & gift tax cutoff is $11.4M, so unless their estate & REPORTED gifting exceeds that amount no future gift tax should be due.

Sam1
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Re: How much can parents gift children in 2019 tax free?

Post by Sam1 » Sat May 11, 2019 6:52 pm

They can give as much money as they would like. Even if they are over the estate tax threshold, it won’t become due until they have both passed.

It blows my mind that so many Americans think there is really a tax on gifts.

Topic Author
atj520
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Joined: Sat Jul 07, 2012 1:40 pm

Re: How much can parents gift children in 2019 tax free?

Post by atj520 » Sat May 11, 2019 6:55 pm

Thanks everyone for the sanity check! Think I got it now. :sharebeer

Gill
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Re: How much can parents gift children in 2019 tax free?

Post by Gill » Sat May 11, 2019 7:04 pm

Sam1 wrote:
Sat May 11, 2019 6:52 pm
They can give as much money as they would like. Even if they are over the estate tax threshold, it won’t become due until they have both passed.

It blows my mind that so many Americans think there is really a tax on gifts.
I’m sorry it blows your mind, but there really is a tax on gifts in excess of the lifetime exemption and it is due currently, not at your death.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

Sam1
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Re: How much can parents gift children in 2019 tax free?

Post by Sam1 » Sun May 12, 2019 7:14 am

Gill wrote:
Sat May 11, 2019 7:04 pm
Sam1 wrote:
Sat May 11, 2019 6:52 pm
They can give as much money as they would like. Even if they are over the estate tax threshold, it won’t become due until they have both passed.

It blows my mind that so many Americans think there is really a tax on gifts.
I’m sorry it blows your mind, but there really is a tax on gifts in excess of the lifetime exemption and it is due currently, not at your death.
Gill
Please provide the IRS link if you have it.

From researching it seems that yes, you can owe taxes if you go above the $11.4 million exemption. My bad! I don’t know anyone who has $11.4 million to gift. I know people who have $11 million but not anyone who has so much that they would gift $11 million. Regardless you have to admit it’s silly that most Americans worry about the gift tax when the limit is $11 million?

Also, the tax is paid by the GIVER. So many of the posters on here seem to think they pay tax on the gift. The entire point of the “gift tax” is so someone can give away all or most of their money in order to avoid the estate tax when they die. There simply isn’t an income tax on nominal gift amounts of $50, 100, 200k. But most Americans don’t seem to realize this.

Jack FFR1846
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Re: How much can parents gift children in 2019 tax free?

Post by Jack FFR1846 » Sun May 12, 2019 7:19 am

Some states have much lower limits. Massachusetts, for example will tax anything over $1M gifted.
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AlohaJoe
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Re: How much can parents gift children in 2019 tax free?

Post by AlohaJoe » Sun May 12, 2019 7:24 am

atj520 wrote:
Sat May 11, 2019 5:49 pm
Lastly, does it matter if I pay them back within the year?
Yes, it does matter. If you pay it back, it is a loan and not a gift. Loans are required to charge interest. If no interest is charged then you have to calculate how much interest SHOULD have been charged and then treat that as a gift.

Figuring all of that out can complicate the paperwork.

Gill
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Location: Florida

Re: How much can parents gift children in 2019 tax free?

Post by Gill » Sun May 12, 2019 7:33 am

Sam1 wrote:
Sun May 12, 2019 7:14 am
Gill wrote:
Sat May 11, 2019 7:04 pm
Sam1 wrote:
Sat May 11, 2019 6:52 pm
They can give as much money as they would like. Even if they are over the estate tax threshold, it won’t become due until they have both passed.

It blows my mind that so many Americans think there is really a tax on gifts.
I’m sorry it blows your mind, but there really is a tax on gifts in excess of the lifetime exemption and it is due currently, not at your death.
Gill
Please provide the IRS link if you have it.

From researching it seems that yes, you can owe taxes if you go above the $11.4 million exemption. My bad! I don’t know anyone who has $11.4 million to gift. I know people who have $11 million but not anyone who has so much that they would gift $11 million. Regardless you have to admit it’s silly that most Americans worry about the gift tax when the limit is $11 million?

Also, the tax is paid by the GIVER. So many of the posters on here seem to think they pay tax on the gift. The entire point of the “gift tax” is so someone can give away all or most of their money in order to avoid the estate tax when they die. There simply isn’t an income tax on nominal gift amounts of $50, 100, 200k. But most Americans don’t seem to realize this.
The worry goes back to the days when the annual exclusion was $3,000 and the lifetime exemption was $30,000. Many more taxpayers were affected by the gift tax then.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

Topic Author
atj520
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Joined: Sat Jul 07, 2012 1:40 pm

Re: How much can parents gift children in 2019 tax free?

Post by atj520 » Sun May 12, 2019 12:23 pm

AlohaJoe wrote:
Sun May 12, 2019 7:24 am
atj520 wrote:
Sat May 11, 2019 5:49 pm
Lastly, does it matter if I pay them back within the year?
Yes, it does matter. If you pay it back, it is a loan and not a gift. Loans are required to charge interest. If no interest is charged then you have to calculate how much interest SHOULD have been charged and then treat that as a gift.

Figuring all of that out can complicate the paperwork.
Thanks, this is good to know as I'll probably want to pay them back at least a portion. Two additional questions in bold.

The money they are going to gift / lend me is coming from an Ally checking account that pays 2%. They're not going to be worried about their rate of return but I'll probably do something like 3%. So next April when they submit their taxes, let's say they made 3%*$20,000 (principle) = .03*20,000=600 in interest. So they would have to include $600 extra in their income in 2019? They are retired, living mostly on SS and a little from their retirement RMDs. I'll have to make sure it doesn't bump them to another bracket I suppose, but I doubt $600 is going to do that.

My wife is not interested in the money from my parents, but if they give her $15k this year, can she immediately give it to me (assuming I already received 15k gift from my parents) and still have my parents under the annual gift limit?

Sam1
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Re: How much can parents gift children in 2019 tax free?

Post by Sam1 » Sun May 12, 2019 12:46 pm

atj520 wrote:
Sun May 12, 2019 12:23 pm
AlohaJoe wrote:
Sun May 12, 2019 7:24 am
atj520 wrote:
Sat May 11, 2019 5:49 pm
Lastly, does it matter if I pay them back within the year?
Yes, it does matter. If you pay it back, it is a loan and not a gift. Loans are required to charge interest. If no interest is charged then you have to calculate how much interest SHOULD have been charged and then treat that as a gift.

Figuring all of that out can complicate the paperwork.
Thanks, this is good to know as I'll probably want to pay them back at least a portion. Two additional questions in bold.

The money they are going to gift / lend me is coming from an Ally checking account that pays 2%. They're not going to be worried about their rate of return but I'll probably do something like 3%. So next April when they submit their taxes, let's say they made 3%*$20,000 (principle) = .03*20,000=600 in interest. So they would have to include $600 extra in their income in 2019? They are retired, living mostly on SS and a little from their retirement RMDs. I'll have to make sure it doesn't bump them to another bracket I suppose, but I doubt $600 is going to do that.

My wife is not interested in the money from my parents, but if they give her $15k this year, can she immediately give it to me (assuming I already received 15k gift from my parents) and still have my parents under the annual gift limit?
There is no division of assets between husband and wife unless you divorce. Your wife can give you anything she wants and vice versa.

OhioGozaimas
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Re: How much can parents gift children in 2019 tax free?

Post by OhioGozaimas » Sun May 12, 2019 1:05 pm

I believe the $15k exclusion is on the total value of all gifts (birthday, Christmas, whatever) given to an individual during a calendar year, not for cash gifts only.

Form 709 should be filed for any annual gifting above $15k. Form 709 gift tax returns are individual, not joint. So in the case of split gifts (over $30k) from a couple, both donors should file 709s.

FYI: https://www.irs.gov/pub/irs-pdf/i709.pdf
Map out your future – but do it in pencil. – Jon Bon Jovi

wrongfunds
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Re: How much can parents gift children in 2019 tax free?

Post by wrongfunds » Sun May 12, 2019 3:47 pm

When parents pay for a child's wedding and receptions and honeymoon, is that considered a "gift" to the child? Or only the money given for the down payment to the child will be considered "gift"? Many of the weddings that I have attended are multiple hundred thousand dollar extravaganza. Do they get reported to IRS?

Topic Author
atj520
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Joined: Sat Jul 07, 2012 1:40 pm

Re: How much can parents gift children in 2019 tax free?

Post by atj520 » Sun May 12, 2019 4:31 pm

OhioGozaimas wrote:
Sun May 12, 2019 1:05 pm
I believe the $15k exclusion is on the total value of all gifts (birthday, Christmas, whatever) given to an individual during a calendar year, not for cash gifts only.

Form 709 should be filed for any annual gifting above $15k. Form 709 gift tax returns are individual, not joint. So in the case of split gifts (over $30k) from a couple, both donors should file 709s.

FYI: https://www.irs.gov/pub/irs-pdf/i709.pdf
Very helpful. Thank you!

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Go Blue 99
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Re: How much can parents gift children in 2019 tax free?

Post by Go Blue 99 » Sun May 12, 2019 7:11 pm

wrongfunds wrote:
Sun May 12, 2019 3:47 pm
When parents pay for a child's wedding and receptions and honeymoon, is that considered a "gift" to the child? Or only the money given for the down payment to the child will be considered "gift"? Many of the weddings that I have attended are multiple hundred thousand dollar extravaganza. Do they get reported to IRS?
https://blog.sfgate.com/pender/2013/05/ ... -gift-tax/

inbox788
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Re: How much can parents gift children in 2019 tax free?

Post by inbox788 » Sun May 12, 2019 8:03 pm

atj520 wrote:
Sun May 12, 2019 12:23 pm
AlohaJoe wrote:
Sun May 12, 2019 7:24 am
Yes, it does matter. If you pay it back, it is a loan and not a gift. Loans are required to charge interest. If no interest is charged then you have to calculate how much interest SHOULD have been charged and then treat that as a gift.

Figuring all of that out can complicate the paperwork.
Thanks, this is good to know as I'll probably want to pay them back at least a portion. Two additional questions in bold.

The money they are going to gift / lend me is coming from an Ally checking account that pays 2%. They're not going to be worried about their rate of return but I'll probably do something like 3%. So next April when they submit their taxes, let's say they made 3%*$20,000 (principle) = .03*20,000=600 in interest. So they would have to include $600 extra in their income in 2019? They are retired, living mostly on SS and a little from their retirement RMDs. I'll have to make sure it doesn't bump them to another bracket I suppose, but I doubt $600 is going to do that.

My wife is not interested in the money from my parents, but if they give her $15k this year, can she immediately give it to me (assuming I already received 15k gift from my parents) and still have my parents under the annual gift limit?
Is it a gift or a loan? If it's a loan, it can get complicated. A gift has no strings or obligations. Your parents can gift you anything (just adhere to reporting requirements state here). You can gift your parents anything anytime. Don't overcomplicate things by putting conditions on gifts; next thing you know, you're having lawyers draw up contracts. The whole reason to keep gifts under the limit is so as not to have to bother with unnecessary complications.

AlohaJoe
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Re: How much can parents gift children in 2019 tax free?

Post by AlohaJoe » Sun May 12, 2019 8:17 pm

atj520 wrote:
Sun May 12, 2019 12:23 pm
The money they are going to gift / lend me is coming from an Ally checking account that pays 2%. They're not going to be worried about their rate of return but I'll probably do something like 3%.
The IRS requires that private loans charge an interest rate that is no lower than the "Applicable Federal Rate". The rate is calculated monthly and depends on the length of the loan and how often interest is compounded. https://apps.irs.gov/app/picklist/list/ ... Rates.html

That's just an FYI, since 3% is above the current AFR.

wrongfunds
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Re: How much can parents gift children in 2019 tax free?

Post by wrongfunds » Sun May 12, 2019 8:52 pm

Go Blue 99 wrote:
Sun May 12, 2019 7:11 pm
wrongfunds wrote:
Sun May 12, 2019 3:47 pm
When parents pay for a child's wedding and receptions and honeymoon, is that considered a "gift" to the child? Or only the money given for the down payment to the child will be considered "gift"? Many of the weddings that I have attended are multiple hundred thousand dollar extravaganza. Do they get reported to IRS?
https://blog.sfgate.com/pender/2013/05/ ... -gift-tax/
I have never really figured this part out. I mean a high worth BH routinely pays $0.25M per child (~$65K per year at better private school in my neighborhood) to put her through college. How is it technically any different than paying for her wedding? At least for the wedding one can argue that the party was really for the benefit of the parents as all the guests were parent's friends and relatives. The education on the other hand directly benefited the child.

There is probably fine line between reducing the future estate by "spending" money on your kids and grandkids; be it paying for their med school, buying them a spanking new Ferrari, taking them to a 3-week African Safari vacation etc. Technically, all of those activities could be considered "gift in kind".

My calculation shows that if we continue to work and save at our current rate for another 37.9 years, our net worth will cross the $11.6M mark and then we will really have to worry about the gift taxes.

Until that time, I treat any discussion of gift taxes as thinly veiled bragging.

neilpilot
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Re: How much can parents gift children in 2019 tax free?

Post by neilpilot » Mon May 13, 2019 12:35 pm

wrongfunds wrote:
Sun May 12, 2019 8:52 pm


I have never really figured this part out. I mean a high worth BH routinely pays $0.25M per child (~$65K per year at better private school in my neighborhood) to put her through college. How is it technically any different than paying for her wedding? At least for the wedding one can argue that the party was really for the benefit of the parents as all the guests were parent's friends and relatives. The education on the other hand directly benefited the child.
So you cannot understand that the $$ paid to support a dependent minor child is not considered a "gift" by the IRS?

wrongfunds
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Re: How much can parents gift children in 2019 tax free?

Post by wrongfunds » Mon May 13, 2019 2:53 pm

what do you mean by "minor" child? I don't know any "minor" attending medical school. Do you?

decapod10
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Re: How much can parents gift children in 2019 tax free?

Post by decapod10 » Mon May 13, 2019 3:09 pm

wrongfunds wrote:
Sun May 12, 2019 8:52 pm
Go Blue 99 wrote:
Sun May 12, 2019 7:11 pm
wrongfunds wrote:
Sun May 12, 2019 3:47 pm
When parents pay for a child's wedding and receptions and honeymoon, is that considered a "gift" to the child? Or only the money given for the down payment to the child will be considered "gift"? Many of the weddings that I have attended are multiple hundred thousand dollar extravaganza. Do they get reported to IRS?
https://blog.sfgate.com/pender/2013/05/ ... -gift-tax/
I have never really figured this part out. I mean a high worth BH routinely pays $0.25M per child (~$65K per year at better private school in my neighborhood) to put her through college. How is it technically any different than paying for her wedding? At least for the wedding one can argue that the party was really for the benefit of the parents as all the guests were parent's friends and relatives. The education on the other hand directly benefited the child.

There is probably fine line between reducing the future estate by "spending" money on your kids and grandkids; be it paying for their med school, buying them a spanking new Ferrari, taking them to a 3-week African Safari vacation etc. Technically, all of those activities could be considered "gift in kind".

My calculation shows that if we continue to work and save at our current rate for another 37.9 years, our net worth will cross the $11.6M mark and then we will really have to worry about the gift taxes.

Until that time, I treat any discussion of gift taxes as thinly veiled bragging.
Rightly or wrongly, US government and US society tends to view educational expenses (and often medical expenses) in a different light than other sorts of expenses, and therefore tends to be more lenient on these things taxwise. Trying to get a college education in theory is something society considers a "good" thing, unlike spending $200k on a wedding, and therefore the tax code in theory makes it easier to do so.

wrongfunds
Posts: 1969
Joined: Tue Dec 21, 2010 3:55 pm

Re: How much can parents gift children in 2019 tax free?

Post by wrongfunds » Mon May 13, 2019 4:59 pm

I suspect when push comes to shove, there is a fundamental difference between "spending" "future inheritance" versus "giving it as raw cash". Would there ever be an issue when the fully paid for first class African Safari for your extended family comes under "gift" classification?

delamer
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Re: How much can parents gift children in 2019 tax free?

Post by delamer » Mon May 13, 2019 5:12 pm

atj520 wrote:
Sun May 12, 2019 12:23 pm
AlohaJoe wrote:
Sun May 12, 2019 7:24 am
atj520 wrote:
Sat May 11, 2019 5:49 pm
Lastly, does it matter if I pay them back within the year?
Yes, it does matter. If you pay it back, it is a loan and not a gift. Loans are required to charge interest. If no interest is charged then you have to calculate how much interest SHOULD have been charged and then treat that as a gift.

Figuring all of that out can complicate the paperwork.
Thanks, this is good to know as I'll probably want to pay them back at least a portion. Two additional questions in bold.

The money they are going to gift / lend me is coming from an Ally checking account that pays 2%. They're not going to be worried about their rate of return but I'll probably do something like 3%. So next April when they submit their taxes, let's say they made 3%*$20,000 (principle) = .03*20,000=600 in interest. So they would have to include $600 extra in their income in 2019? They are retired, living mostly on SS and a little from their retirement RMDs. I'll have to make sure it doesn't bump them to another bracket I suppose, but I doubt $600 is going to do that.
I am confused by your question regarding income taxes.

Do you mean if you pay them $600 interest on the $20,000 as a loan, will they have to pay income taxes on the $600?

Topic Author
atj520
Posts: 10
Joined: Sat Jul 07, 2012 1:40 pm

Re: How much can parents gift children in 2019 tax free?

Post by atj520 » Mon May 13, 2019 6:03 pm

delamer wrote:
Mon May 13, 2019 5:12 pm
atj520 wrote:
Sun May 12, 2019 12:23 pm
AlohaJoe wrote:
Sun May 12, 2019 7:24 am
atj520 wrote:
Sat May 11, 2019 5:49 pm
Lastly, does it matter if I pay them back within the year?
Yes, it does matter. If you pay it back, it is a loan and not a gift. Loans are required to charge interest. If no interest is charged then you have to calculate how much interest SHOULD have been charged and then treat that as a gift.

Figuring all of that out can complicate the paperwork.
Thanks, this is good to know as I'll probably want to pay them back at least a portion. Two additional questions in bold.

The money they are going to gift / lend me is coming from an Ally checking account that pays 2%. They're not going to be worried about their rate of return but I'll probably do something like 3%. So next April when they submit their taxes, let's say they made 3%*$20,000 (principle) = .03*20,000=600 in interest. So they would have to include $600 extra in their income in 2019? They are retired, living mostly on SS and a little from their retirement RMDs. I'll have to make sure it doesn't bump them to another bracket I suppose, but I doubt $600 is going to do that.
I am confused by your question regarding income taxes.

Do you mean if you pay them $600 interest on the $20,000 as a loan, will they have to pay income taxes on the $600?
Yes, exactly what you stated. Thanks.

inbox788
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Re: How much can parents gift children in 2019 tax free?

Post by inbox788 » Mon May 13, 2019 6:10 pm

delamer wrote:
Mon May 13, 2019 5:12 pm
atj520 wrote:
Sun May 12, 2019 12:23 pm
The money they are going to gift / lend me is coming from an Ally checking account that pays 2%. They're not going to be worried about their rate of return but I'll probably do something like 3%. So next April when they submit their taxes, let's say they made 3%*$20,000 (principle) = .03*20,000=600 in interest. So they would have to include $600 extra in their income in 2019? They are retired, living mostly on SS and a little from their retirement RMDs. I'll have to make sure it doesn't bump them to another bracket I suppose, but I doubt $600 is going to do that.
I am confused by your question regarding income taxes.

Do you mean if you pay them $600 interest on the $20,000 as a loan, will they have to pay income taxes on the $600?
It's NOT gift / lend. If you're paying interest, it's a LOAN! And your mortgage lender is going to require you to list all your loans. You might as well get the loan from the bank and not complicate matters for your parents. The last thing you want to do is involve them in your mortgage application and they become co-applicants.

Get your finances in order before you apply for mortgage. Make sure your down payment is in your account more than 60 days before you apply for the mortgage, and even then you might have to provide additional documentation.

https://www.quickenloans.com/blog/gift- ... wn-payment

delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: How much can parents gift children in 2019 tax free?

Post by delamer » Mon May 13, 2019 6:17 pm

inbox788 wrote:
Mon May 13, 2019 6:10 pm
delamer wrote:
Mon May 13, 2019 5:12 pm
atj520 wrote:
Sun May 12, 2019 12:23 pm
The money they are going to gift / lend me is coming from an Ally checking account that pays 2%. They're not going to be worried about their rate of return but I'll probably do something like 3%. So next April when they submit their taxes, let's say they made 3%*$20,000 (principle) = .03*20,000=600 in interest. So they would have to include $600 extra in their income in 2019? They are retired, living mostly on SS and a little from their retirement RMDs. I'll have to make sure it doesn't bump them to another bracket I suppose, but I doubt $600 is going to do that.
I am confused by your question regarding income taxes.

Do you mean if you pay them $600 interest on the $20,000 as a loan, will they have to pay income taxes on the $600?
It's NOT gift / lend. If you're paying interest, it's a LOAN! And your mortgage lender is going to require you to list all your loans. You might as well get the loan from the bank and not complicate matters for your parents. The last thing you want to do is involve them in your mortgage application and they become co-applicants.

Get your finances in order before you apply for mortgage. Make sure your down payment is in your account more than 60 days before you apply for the mortgage, and even then you might have to provide additional documentation.

https://www.quickenloans.com/blog/gift- ... wn-payment
A loan for the parents may or may not make sense.

But they aren’t going to become co-applicants on a bank mortgage just because they made a loan to the OP.

inbox788
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Re: How much can parents gift children in 2019 tax free?

Post by inbox788 » Mon May 13, 2019 6:23 pm

delamer wrote:
Mon May 13, 2019 6:17 pm
A loan for the parents may or may not make sense.

But they aren’t going to become co-applicants on a bank mortgage just because they made a loan to the OP.
If OP doesn't have a down payment or if the additional loan makes his debt to equity ratio too high, he's not going to qualify with a cosigner.

WannabeAgAlum
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Re: How much can parents gift children in 2019 tax free?

Post by WannabeAgAlum » Mon May 13, 2019 6:49 pm

wrongfunds wrote:
Sun May 12, 2019 8:52 pm
Go Blue 99 wrote:
Sun May 12, 2019 7:11 pm
wrongfunds wrote:
Sun May 12, 2019 3:47 pm
When parents pay for a child's wedding and receptions and honeymoon, is that considered a "gift" to the child? Or only the money given for the down payment to the child will be considered "gift"? Many of the weddings that I have attended are multiple hundred thousand dollar extravaganza. Do they get reported to IRS?
https://blog.sfgate.com/pender/2013/05/ ... -gift-tax/
I have never really figured this part out. I mean a high worth BH routinely pays $0.25M per child (~$65K per year at better private school in my neighborhood) to put her through college. How is it technically any different than paying for her wedding? At least for the wedding one can argue that the party was really for the benefit of the parents as all the guests were parent's friends and relatives. The education on the other hand directly benefited the child.

There is probably fine line between reducing the future estate by "spending" money on your kids and grandkids; be it paying for their med school, buying them a spanking new Ferrari, taking them to a 3-week African Safari vacation etc. Technically, all of those activities could be considered "gift in kind".

My calculation shows that if we continue to work and save at our current rate for another 37.9 years, our net worth will cross the $11.6M mark and then we will really have to worry about the gift taxes.

Until that time, I treat any discussion of gift taxes as thinly veiled bragging.
Two things:

1-Qualified payments for tuition and medical expenses do not count against the $15,000 annual exclusion or the $11.4 million gift tax exemption. I believe payments need to be made directly to the institution. There is no limit on these payments for gift tax purposes.

2-The gift and estate tax exemption amount (currently $11.4 million) will be reduced by 1/2 in 2026 under current law, adjusted for inflation. So unless you die before 2026, your number is half the current amount, adjusted for inflation, under current law.

Wannabe

TropikThunder
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Re: How much can parents gift children in 2019 tax free?

Post by TropikThunder » Mon May 13, 2019 10:42 pm

wrongfunds wrote:
Mon May 13, 2019 2:53 pm
what do you mean by "minor" child? I don't know any "minor" attending medical school. Do you?
You didn’t say medical school, you said “better private school in my neighborhood”. Which could include private secondary school as well as undergraduate university.
wrongfunds wrote:
Sun May 12, 2019 8:52 pm
I have never really figured this part out. I mean a high worth BH routinely pays $0.25M per child (~$65K per year at better private school in my neighborhood) to put her through college.
Plus, Doogie Howser was a minor in medical school. :P

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TomatoTomahto
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Re: How much can parents gift children in 2019 tax free?

Post by TomatoTomahto » Tue May 14, 2019 5:33 am

WannabeAgAlum wrote:
Mon May 13, 2019 6:49 pm
1-Qualified payments for tuition and medical expenses do not count against the $15,000 annual exclusion or the $11.4 million gift tax exemption. I believe payments need to be made directly to the institution. There is no limit on these payments for gift tax purposes.
You are right; tuition and medical bills (or medical insurance) should be paid directly.

Additionally, I was told that if one check is being issued, even from the joint account of a married couple for more than $15k, that both fill out a 709 form to split the gift. Probably overly cautious, but I’m going to do it from now on.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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TomatoTomahto
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Re: How much can parents gift children in 2019 tax free?

Post by TomatoTomahto » Tue May 14, 2019 5:45 am

wrongfunds wrote:
Sun May 12, 2019 8:52 pm
My calculation shows that if we continue to work and save at our current rate for another 37.9 years, our net worth will cross the $11.6M mark and then we will really have to worry about the gift taxes.

Until that time, I treat any discussion of gift taxes as thinly veiled bragging.
As another poster mentioned, in MA (for example), the lifetime exclusion is $1M. We recently moved to MA, and plan to gift “early inheritance” to our heirs. We were advised to dot our i’s and cross our t’s by submitting form 709’s if there are any gray areas (eg, combined gifts from one account). MA is aggressive in going after its pound of flesh after you die.

I’ve been accused of humble bragging in the past; this time I’m innocent. :D
Okay, I get it; I won't be political or controversial. The Earth is flat.

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HueyLD
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Re: How much can parents gift children in 2019 tax free?

Post by HueyLD » Tue May 14, 2019 7:53 am

Good idea to write two checks if one plans to donate more than $15k per year to a donee.

I didn't know that the Commonwealth had such a low bar for estate tax. So, it is a wise plan to slowly give out early inheritance by staying under the radar.

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TomatoTomahto
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Re: How much can parents gift children in 2019 tax free?

Post by TomatoTomahto » Tue May 14, 2019 11:15 am

HueyLD wrote:
Tue May 14, 2019 7:53 am
I didn't know that the Commonwealth had such a low bar for estate tax. So, it is a wise plan to slowly give out early inheritance by staying under the radar.
It’s not only a low bar, it’s a cliff. $1,000,001 and your estate will be taxed on the $1,000,001. The tax goes up in tiers, up to 16%, so it’s not de minimis.
Okay, I get it; I won't be political or controversial. The Earth is flat.

wrongfunds
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Re: How much can parents gift children in 2019 tax free?

Post by wrongfunds » Tue May 14, 2019 5:11 pm

That's exactly why one should plan on having well in excess of $22M estate; that way you will NOT worry about cliffs. I think DoubleTomato is getting close to that number :-)

international001
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Re: How much can parents gift children in 2019 tax free?

Post by international001 » Tue May 14, 2019 5:30 pm

atj520 wrote:
Mon May 13, 2019 6:03 pm
delamer wrote:
Mon May 13, 2019 5:12 pm
atj520 wrote:
Sun May 12, 2019 12:23 pm
AlohaJoe wrote:
Sun May 12, 2019 7:24 am
atj520 wrote:
Sat May 11, 2019 5:49 pm
Lastly, does it matter if I pay them back within the year?
Yes, it does matter. If you pay it back, it is a loan and not a gift. Loans are required to charge interest. If no interest is charged then you have to calculate how much interest SHOULD have been charged and then treat that as a gift.

Figuring all of that out can complicate the paperwork.
Thanks, this is good to know as I'll probably want to pay them back at least a portion. Two additional questions in bold.

The money they are going to gift / lend me is coming from an Ally checking account that pays 2%. They're not going to be worried about their rate of return but I'll probably do something like 3%. So next April when they submit their taxes, let's say they made 3%*$20,000 (principle) = .03*20,000=600 in interest. So they would have to include $600 extra in their income in 2019? They are retired, living mostly on SS and a little from their retirement RMDs. I'll have to make sure it doesn't bump them to another bracket I suppose, but I doubt $600 is going to do that.
I am confused by your question regarding income taxes.

Do you mean if you pay them $600 interest on the $20,000 as a loan, will they have to pay income taxes on the $600?
Yes, exactly what you stated. Thanks.
What is the difference with 'gifting back' $20,000 + $600?'

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Re: How much can parents gift children in 2019 tax free?

Post by TropikThunder » Tue May 14, 2019 6:33 pm

international001 wrote:
Tue May 14, 2019 5:30 pm
What is the difference with 'gifting back' $20,000 + $600?'
That would require OP lie on his mortgage application re: any other loans, and require his parents to evade taxes by not declaring the interest. Some people won't let that stop them, but it's still wrong. Especially when doing it right has so little downside.

international001
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Re: How much can parents gift children in 2019 tax free?

Post by international001 » Fri May 17, 2019 1:39 pm

TropikThunder wrote:
Tue May 14, 2019 6:33 pm
international001 wrote:
Tue May 14, 2019 5:30 pm
What is the difference with 'gifting back' $20,000 + $600?'
That would require OP lie on his mortgage application re: any other loans, and require his parents to evade taxes by not declaring the interest. Some people won't let that stop them, but it's still wrong. Especially when doing it right has so little downside.
Why is a lie? Would the IRS have have to prove intent of pay back? Or that you would get some of punishment if you didn't?

I think you can use a gift as a way of social back payment. It's usually what you often do with birthday gifts.. you want to gift something comparable to what it was gifted to you.

Often parents give money to kids for some special expenses; kids pay back when they can or when they get a job. Often parents don't even want it back. It's a grey area

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