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Th IRS Gift Tax Limit 2010 - What's Going to Happen?

By September 2, 2009

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One of the biggest questions on the horizon for parents and grandparents who like to give away money, is what's going to happen to the IRS Gift Tax Limit in 2010. Much of the confusion centers around the fact that in 2010, for one brief shining moment, the Federal estate tax is going to disappear. While it could hypothetically stay gone, it is scheduled to reappear in 2011, barring an unlikely act of Congress.

So naturally, many are wondering if the disappearance of the estate tax will also mean a disappearance of IRS gift tax limit (properly known as the annual exclusion amount), which can result in a gift tax being levied if too much money is given to anyone besides a spouse or a non-profit.

Sadly, nothing substantial is happening to this rule. There will still be an IRS gift tax limit in 2010, and it's looking more and more like they're going to hold the IRS gift tax limit for 2010 at $13,000 per donor, per recipient.

The only real change, which is nothing to write home about, is that the top gift tax rate will drop to 35% in 2010. But that change too is likely only temporary.

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Comments
February 1, 2010 at 2:39 pm
(1) gigi says:

what do you mean in the gifting that it is “13K per doner, per recipient?” Can mom give each child 13K? or only one child 13K. Or would she have to divide 13K among all children? thanks.

February 2, 2010 at 12:03 am
(2) collegesavings says:

Hi Gigi-

Yes, $13,000 per donor, per recipient means that a mother can give $13,000 to each of her children in 2010 (aside from direct financial support of a dependent). Theoretically, if she was married, her husband could also give another $13,000 to each of the same children. Hope that helps!

February 3, 2010 at 12:15 am
(3) Timothy Horn says:

What if You wanted to give to a friend, ex-wife, or the mother of your child?

February 3, 2010 at 9:00 am
(4) collegesavings says:

There is no restriction there. Further, you can give an unlimited amount to your legal spouse in any year.

February 3, 2010 at 2:54 pm
(5) Lisa says:

My mom passed away and I am a joint owner of a CD of hers that I will be cashing in. I want the bank to write out separate checks to my two sisters and me, equally divided. Since the CD is only in my name, as joint owner with my deceased mom, will I incur some type of tax that my sisters will not?

February 6, 2010 at 5:23 pm
(6) Ralph Adamo says:

If you are a joint owner with your deceased mother, then the bank will need to have your mother’s death certificate. They will typically want to see an original in your bank’s branch office, but they will usually make a copy of the death certificate for the bank’s records and give you back your original. Then you will be the 100% owner of the CD. There would be no tax impact. And at this point, any distributions that you make from the funds are 100% your own funds. You could, of course, do what you want to with the money (e.g., save, invest, distribute, or spend). If you chose to authorize the bank to divide the money three ways (between your two sisters and you)–assuming the bank agrees to do that for you, instead of directly paying you 100%–then, yes, you could be liable for gift taxes, but only if the amount paid to each sister is more than $13,000 for the year. However, if you are married, you and your husband could gift each sister $26,000 for the year, without any tax implications. And of course, if the amount of money is more than this, you could simply make similar annual gifts each year.

February 22, 2010 at 12:04 am
(7) Cynthia says:

how does gifting apply to real estate? Do the rules and amounts change? Can it be gifted to a son in law?

February 24, 2010 at 4:51 pm
(8) Justin says:

My mother was given a large amount of money from her husband which they are seperated but are still married. Why should she be paying a gift tax for this money when they are still married. The bank has been messing with her about this for more than a year now saying she will have the money the next day then the next week.

February 27, 2010 at 12:46 pm
(9) AlanM says:

Justin: The bank should have no control over this at all assuming commercial banks and demand deposit accounts unless one of the parties isn’t a willing participant.

March 4, 2010 at 4:42 pm
(10) Justin says:

The bank is still doing it they said they will have the funds by the first then the third and now it is the fouth and still no money. They are all happy about my mom being the richest person at there bank but they are still giving her the shaft. I hate Wells Fargo. They should have to pay her all the interest that the money would have gotten over the last year!

March 11, 2010 at 2:09 pm
(11) jl says:

A little off subject, but don’t forget with the joint account, it could all be subject to Federal Estate tax (depending on when she died) as well as state inheritance tax. Again, depending on where your mother was domiciled as of date of death. You should really get council on this before it is done or you could be stuck with a big tax bill.

March 16, 2010 at 6:46 pm
(12) Scott A says:

Can the parent give a child 13k and that childs spouse 13k without them having to pay any tax?

March 16, 2010 at 9:39 pm
(13) Lanelle says:

where do you report gifts from parents on tax return and where do parents report making gift to child?

March 24, 2010 at 2:34 pm
(14) JJ says:

I cannot find on the IRS website anything in regards to the gift tax for 2010…Are you aware if the amount is still $13000 or has changed? A lawyer told me it’s down to $11000, but some people said there isn’t a limit. I have been given too many different answers. Thanks!

March 26, 2010 at 7:31 pm
(15) dick says:

In 2010 can my mother give $13,000 to each of us without any tax consequence. There are 4 of us. She just sold her home and is in assisted living.My concern is that if each of us hold it in a cd and do not cash it just in case she needs it for her care if she runs low on money down the road is this legal to do. The intent is to hold it but if needed it give it back. She is totally aware of this. Thank you for any legal help.

March 30, 2010 at 7:03 pm
(16) Nicole says:

Scenario: two children and one of the children is married with a kid and the other is not married and has no kid. If my husband and I wanted to gift the maximum amount and we gave each child 26,000 and then the married child’s husband 26,000 and the married child’s kid 26,000, is there anyway to make give the unmarried child the 52,000 that we gave to the spouse and child of the married child? Say through like a tax free trust? Otherwise I am afraid this would be unfair to the unmarried child? Right?

Also, say that one of the children has a lot of unpaid school loan debt exceeding the gift amount . . . Can I pay that off for my child or is that considered a gift as well?

March 31, 2010 at 2:41 pm
(17) R F Custales says:

In 2010 taxes If I have a CD that I wanted to gift to my single parent godson, is it possible to transfer some of the CD amount in his name without he or I being taxed? If I couldn’t transfer it or if he wanted to open another CD with another institution say with the not to exceed $13,000 would he or I be taxed. Or if the amount exceeded the allowed $13,000 would both he and I be taxed for over the $13,000? If so, What tax forms are required?

April 10, 2010 at 8:58 am
(18) Veronica Beecham says:

I purchased a burnt down home for $8800 in Decemeber 2009. I decided a few months later that it will cost me too much to fix it. I have a close friend that I decide to give the house to as a gift. What are the tax consequences. Does the IRS consider the 8800 for the burnt down house for the fair market value. Can my friend be excempt from paying gift tax

April 22, 2010 at 5:14 pm
(19) Barry says:

So my wife and I can give my son and daughter-in-law a max of $52,000 this year?

May 2, 2010 at 12:55 pm
(20) Bill says:

I won the lottery, and want to give my daughter One Million Dollars. Is that considered income for her? How much tax will she have to pay?

May 4, 2010 at 5:08 pm
(21) edwin says:

I am retired, can I withdraw funds from my 401k for a gift to my daughter without paying the taxes or penalty on the amount withdrawn

May 6, 2010 at 3:27 pm
(22) Raymond Furnal says:

can my wife and i gift $20000.00 to my son? My son is from a previous marriage. do we have to file a form?

Ray

May 19, 2010 at 11:18 am
(23) MIck says:

Can a parent with alzheimers legally give money through their spouse to their children or is this parent no longer able to give gifts.

May 30, 2010 at 4:24 pm
(24) Bill Smith says:

Is it true that you can give up to $1 million in gifts that exceed the annual limit—total—in your lifetime, before you start owing the gift tax?

June 3, 2010 at 8:54 pm
(25) jenny says:

Yes, $1 million is true, but when that person passes, it will come out of the exclusion when the estate taxes are due. In other words, when someone gives the $1 million lifetime maximum, then $1 million less will be considered a deduction at the donor’s time of death.

June 20, 2010 at 5:53 pm
(26) Tom says:

People, remember that the giver of a gift over $13K is responsible for paying taxes NOT the recipient.

June 24, 2010 at 1:15 pm
(27) Mark says:

Who pays the taxes on a gift over the gift limit for a year ($13K for 2010)? Also can a mother give her daughter $13K and then her daughter’s husband $13K without incurring any gift taxes?

June 24, 2010 at 1:43 pm
(28) Laura says:

We were given a gift of $37K to help with our moving in to a new house. Can this $37 be broken down now into 3 gifts from my mother to myself and my two childern or one of my children and my husband?

June 25, 2010 at 3:30 pm
(29) Clair says:

Mom (89 yrs old) want to gift to 9 children $1,250 each. If she does this, and would end up in a Home/ Assisted Living, can Medicare require the money be given back before she can receive any Medicare assistance for Living in an assited living place?

July 8, 2010 at 3:44 am
(30) John says:

No one has to pay any taxes until they give away more than 1 million dollars in thier lifetime. The only thing one needs to do if gifting more than 13k in one year is file the form to let the IRS know about it. No taxes are due until the 1 mil is given away. Lots of mis-information on this thread.

August 30, 2010 at 8:13 pm
(31) Dee says:

What if you’re the friend, ex-wife, etc. that receives the gift is it tax free only if $13,000 or less?

September 11, 2010 at 8:34 pm
(32) Hari says:

Couple questions – If the recipient is student non-earning, does student have to pay any taxes on received gift as long it is below $13000 Limit?

Does recipient (if he/she is tax paying person) have to pay tax on received gift as long as it is below $13000 limit? How does that work? In other words what’s the tax treatment for recipient on the received gift money?

September 27, 2010 at 11:15 pm
(33) Lisa says:

John……WHAT?

October 8, 2010 at 12:56 pm
(34) Bev says:

My husband has 2 adult children from a previous marriage. We would like to give them money this year. As their step mother, can I also give them money within the gift limits or that limited to their natural mother? Thanks

October 28, 2010 at 5:40 pm
(35) JJ says:

can you gift part of your 401k to a child i am 56 yrs old do the penalties still apply? I want to have the whole 15k but fidelity says theres no way to give him the money or put it in his name to deal with the penalties I understand I will be charged 20% in federal taxes but still would have to pay income taxes on it this is why I would rather my son deal with this issues as I am a straight forward just understand the bare necessites of taxes kinda person

November 4, 2010 at 6:32 pm
(36) CaraL says:

I am an adult. If my parents both give me $13,000, for a total of $26,000, what, if any taxes do I need to pay for that gift?

November 9, 2010 at 6:21 pm
(37) Nancy says:

In 2010, I gave $50K each to two of my children. Each have two children. The money was to be divided equally between the parents and two children. Do I have to pay gift tax?

November 16, 2010 at 12:27 pm
(38) Sasha says:

@Nancy
You do not pay any gift tax unless you have already given away more than 1 million dollars in your lifetime.
You do need to file IRS gift tax form 709 though.

November 23, 2010 at 9:38 pm
(39) Elizabeth says:

We live in Virginia, and my parents have offered to contribute 50% of my daughter`s college education. They live in Canada. What is the best way for them to give her the money, considering tax implications and federal student aid rules? We do not as yet have a college savings account (we plan to borrow the remainder).

December 5, 2010 at 9:19 am
(40) JoeG says:

In 2010 can my mother give $13,000 to each of us without any tax consequence. There are 3 of us. HGer home was in our name and she is now in assisted living.
Our question is if each of us hold the cash in a cd and do not cash it just in case she needs it for her care if she runs low on money down the road is this legal to do. The intent is to hold it but if needed it give it back. She is totally aware of this.

December 5, 2010 at 3:13 pm
(41) Tony says:

John, I think you are contributing to the bad information on this thread. A donor is allowed to give – tax-free – 13k/year per donee. Anything above this amount that is given to a donee in a given year is subject to the gift tax. The donor can either pay the tax during the year or not. If the donor decides not to pay it, then the amount exceeding the annual exclusion is applied to the donor’s $1 million lifetime gift exemption. However, taking this gift exemption reduces the donors overall exemption by that amount.

March 29, 2011 at 6:29 pm
(42) Pete Charles says:

My living father who is 96 years old just received a 600k inheritance. He would like to divide it six ways, giving 1/6 to himself to live on and then to each of the 5 children 1/6 each. So each child would receive $100k each. What is the tax impact for the father, if any and what is the tax impact for the children, if any. thanks

Pete

April 17, 2011 at 10:19 am
(43) KSK says:

If a minor (at time of gift, 18 at end of year) received a gift of of stock of 100k (cost basis to donor) and sold it immediately for 400k what is tax basis for minor? Should minor pay Capital gains based on donor’s holding period of more than one year? or short term gains based on minors holding period? Thanks What part of $1Mil did the donor use up?

April 25, 2011 at 2:38 pm
(44) Harri Bernstein says:

Does the gifted money for 2010 have to be given in 2010 or can you give 2010 gift in 2011?

June 2, 2011 at 2:06 pm
(45) kelly says:

my father is selling his company and will be getting 10 million dollars. He wants to be able to give me 1.5 million dollars. Do I have to pay taxes on it? It’s not income. Also, is he able to buy a house for me and then just hand that over and transfer it to my name? What if he set up a corporation with 1.5 million dollars with my name on it? How will this be possible for him to be able to give me the money?

July 7, 2011 at 6:31 pm
(46) Holly says:

Hi,

I would like to gift a home from my great-uncle’s estate, worth approx 40,000 to my half-sister and her family. They would sell it, probably as is . The purpose is to transfer to her so I won’t have to deal with it, and for those proceeds to go to them. She is married. Can I transfer to her, her husband and one of the kids, and if the other 1k is needed to another kid without tax implications? This would be $39,000(3k per person) but the actual fair market value, I believe is under the 40k due to the condition of the home. I don’t want to have to set up a trust to do this, just want to gift the property to them free and clear. Can I do a quit-claim deed? I live in WI.

January 7, 2012 at 12:09 am
(47) Erereeeress says:
January 10, 2012 at 9:34 pm
(48) ozzy says:

I am trying to get my sister on disability title 19 – she has money in 401k and i was told that she needs to reduce her assets. Would that pertain to a 401k retirement? If so, can I give that money as a gift to her son to pay for college tuition?

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