You might be at a time in your life where you have some money you’d like to distribute to family members or friends. If that’s you, you can avoid paying taxes on a cash gift of up to $15,000 in a calendar year. If you go above that, you’re legally required to pay federal taxes on the amount that exceeds $15K.
What you may not realize, though, is that you can give a cash gift together with your spouse. We’ll talk about how to avoid paying marriage gift taxes in this article. Marriage gift taxes are federal taxes you and your spouse pay if you exceed the government-mandated threshold for a cash gift to someone in a single year.
Why Give Cash Gifts?
At this point, you might wonder why you’d want to give someone a chunk of cash. A typical scenario is that you have money to spare, and you have acquaintances or family members who urgently need it.
A large cash gift might go to someone you know and love who has considerable debt. Instead of turning to tools like a debt payment calculator to determine how they can pay off their vehicle or student loans, they can pay off the entire amount all at once with the help of a gift.
You might also decide to give cash to children or family members as a wedding or graduation gift or to help support them with the purchase of a new house or car. This demonstrates generosity on your part, and the recipient will undoubtedly thank you for it.
Giving with Your Spouse
If you do decide you want to give someone you know some money, you probably want to avoid paying federal taxes on it. We’ve established that you can give someone up to $15,000 in one year. If you give this individual money along with your spouse, though, the maximum you can give becomes $30,000.
The term for this is “gift splitting.” There is an IRS form, the 709, that you might be required to file. If you’re giving this maximum amount along with your spouse, you can look at the form and see if you need to include it as part of your next tax return. You can also consult with a tax professional if you aren’t sure.
Lifetime Gift-Giving Limits
You should also know that to avoid paying federal gift taxes throughout your whole life, you need to stay under $11.7 million dollars. This is the largest lifetime exemption per person for either cash gifts or estate taxes. If you give along with your married partner, this amount is $23.4 million for the two of you.
Most people won’t ever be in a position to give away that much money, but it’s still useful to know about these limitations. You can keep track of the total amount you’ve given away if you’re in the habit of giving cash gifts every year.
Leverage Your Marital Status
Even if you’re not necessarily in a position to distribute money right now, you might be someday. Because of this, you should know how much you can give away each year and over your entire lifetime. Maybe sometime later, you will have a grandchild or someone else to whom you’d like to give a cash gift.
When you do, using your marital status is helpful because of the way you can give up to $30,000 as a couple vs. only $15,000 per year as an individual. Hitting that amount and not going over it guarantees you won’t have to pay any federal taxes when the money changes hands.
Many people would prefer not to pay federal taxes on the cash they give away to others, so it’s helpful to know about this trick. Leveraging your marital status is certainly useful in this regard.
You can always give away more than $15,000 per person or $30,000 per couple to a recipient in a single year. If you do, though, you will need to pay taxes on it.