5 myths about gift tax laws

Myth No. 2: Gifts are limited to $13,000
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Wrong again, says Picker. You have a $5 million lifetime limit -- though Congress could change the law when this provision expires at the end of 2012. Give money to one person or many, all at once or over years; it's your choice. But anything over that limit nets the giver a 35 percent tax on the gift, he says.

If you want to give more than $5 million in your lifetime, there is a way: Annual gifts to individuals of $13,000 or less don't count against your $5 million lifetime limit. So you can give someone $5 million one year, and $13,000 every year after that, and never exceed your lifetime gifting limit.

In fact, you can give $13,000 each to as many people as you want every year without raising Internal Revenue Service eyebrows. Married folks can give $26,000 to a single individual by "gift-splitting." But if you give more than the annual exclusion amount, you'll have to file Form 709.

Also exempt from the cap: money for medical care or education that the giver pays directly to the institution. So instead of giving your nephew $20,000 for college, you can write that check directly to Harvard University.

Other wealth-type goodies, such as land, jewelry and stocks, are also included in the annual and lifetime gifting limits, says CFP Jill Gianola, owner of Gianola Financial Planning and author of "The Young Couple's Guide to Growing Rich Together."




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