Do not let constant political and financial speculation prevent you from making annual tax-free exclusions, medical payments, and educational gifts to or for the benefit of your loved ones.
Annual Exclusions: Annual exclusion gifts are transfers of money or property that do not exceed the annual gift tax exclusion amount or value. In other words, donations that are equal to or less than the yearly exclusion amount are not considered taxable gifts by the Internal Revenue Service (IRS). If your donations exceed or do not qualify for the yearly exclusion limit, you may need to submit a gift tax return.
Medical Exclusion: A payment that qualifies for the medical exclusion is another type of transfer that the IRS does not consider a gift for gift tax purposes. To be eligible for the medical exclusion, a payment must meet two critical requirements.
- You must make payment directly to the person or institution that provided the medical care or medical insurance.
- The individual’s insurance company must not have reimbursed the amount paid.
Educational Exclusion: A payment that qualifies for the educational exclusion is another type of transfer that the IRS does not consider a gift for gift tax purposes.
To qualify for the educational exclusion, a payment must meet two critical requirements.
- You must make payment directly to the institution providing the education rather than to the individual receiving the education.
- Your payment must be for tuition only, not for books, supplies, room and board, or other types of education-related expenses.
If your payment fails to meet either of these requirements, it will be considered a gift to the individual.
Giving gifts can be an effective way to provide financial assistance to your family members. If you have any questions about how to make gifts of money or property to your family without also giving money to the IRS, please contact our office. We are available for in-person and virtual consultations.