Colorado Probate Blog - Wade Ash Woods Hill & Farley, P.C.

Year-End Tax Planning

Annual Exclusion Gifts. The gift tax annual exclusion is $14,000 for 2016, and stays the same for 2017. You can make gifts of this amount to each of any number of people in a calendar year and not have to file a gift tax return, and the gifts will not use up part of your estate tax exemption. You can also make gifts of an unlimited amount by directly paying a donee's medical expenses to the provider, or tuition to the educational institution. If you make the gift by a check, the donee must deposit the check and the amount must clear your account prior to the end of the year.

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Don't Forget Your Annual Exclusion Gifts!

A donor may give up to $14,000 per year per donee that qualifies for the annual exclusion from federal gift tax (generally, a gift of a present interest). Earlier in the year, it had been anticipated that amount would increase to $15,000 in 2016, but that turned out not to be true because of a low rate of inflation. So if you have not made annual exclusion gifts for 2015, and you are in a program of giving to reduce the size of your estate, you should make your $14,000 gifts before the end of the year, and you can make 2016 gifts of the same amount in January. If spouses intend to "split their gifts" by doubling the amount of the annual exclusion gifts, the election to split gifts must be made on a U.S. Gift Tax Return (form 709) filed with the IRS. The federal estate tax exemption is $5,430,000 in 2015, and it is increasing to $5,450,000 for decedents dying in 2016.

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