Many elderly New Jersey residents are considering making financial gifts to family and friends at this time of year. If you are considering making such a gift, it is important to understand how the rules applicable to lifetime transfers will impact your gift, otherwise your gift may be subject to a gift tax liability of up to 40 percent.
The current gift-giving limits are as follows:
If you are feeling more generous than the numbers listed above, there are ways to stretch your gift-giving possibilities. If you are married, for example, you can double your annual exclusion amount by giving joint gifts with your spouse. By doubling up, you and your spouse can gift up to $28,000 per recipient, per year. Additionally, the end of the year offers another unique opportunity to double down on giving by gifting up to the annual exclusion amount in December, then gifting the same amount to the same individual in January of the following year.
Much of the gift giving among elderly New Jersey residents is aimed at assisting grandchildren to pay for educational expenses. If this is your goal, there is another way to get around gift tax rules. Under federal law, a person can contribute to a 529 college savings plan up to his or her annual exclusion amount. Importantly, this money grows and is distributed tax-free.