Make Gifts Your Family Will Love But the IRS Won’t Tax

Do not let political and financial speculation prevent you from making tax-free gifts to or for the benefit of your loved ones. Two of the main types of tax-free gifts are annual exclusion gifts and medical exclusions.

Make Annual Exclusion Gifts

Annual exclusion gifts are transfers of money or property in an amount or value that does not exceed the annual gift tax exclusion. In 2023, the annual gift tax exclusion is $17,000 per recipient. Therefore, this year you can give up to $17,000 per person to as many individuals as you choose without having to file a federal gift tax return (Internal Revenue Service Form 709).

In other words, the Internal Revenue Service (IRS) does not consider gifts that are equal to or less than the annual exclusion amount to be taxable gifts at all. You may need to file a gift tax return if your gifts either exceed or do not qualify for the annual exclusion amount. Your estate planning attorney or accountant can guide you.

Make Payments That Qualify for the Medical Exclusion

A payment that qualifies for the medical exclusion is another type of transfer that the IRS does not consider to be a gift for gift tax purposes. Payments qualify for this exclusion if they are made on behalf of an individual to a person or an institution that provided medical care or medical insurance to the individual. In general, medical expenses that qualify for this exclusion are the same ones that are deductible for federal income tax purposes.

Therefore, in 2023, you can pay the cost of your grandchild’s emergency appendectomy and, in the same year, give your grandchild an additional $17,000 without having to file any gift tax returns.

To learn how payments meet the requirements for medical exclusion, reach out to our team of experts. We are available for in-person and virtual consultations.