Cash Gift Taxes

Question

My grandmother & grandfather (on my mothers side) recently both signed over a 5 acre lot in Texas to my name. I have since sold the property but am wondering, what is the cheapest way to give my mother half of the after-tax money? Assume the value I want to give to my mother is 50K.

There are more details about the source of the property sale in this question I just posted hoping to get information on the gains tax to be paid at year end.

• Am I allowed to give a one time gift to family tax free?
• Would me paying off their house from my bank account count as a gift? Since this is what they plan to do anyway, I am wondering if me just paying off their house would be a tax-free way to give them their share
• I believe the tax-free limit for cash gifts is 15K per year. Could I give my step-dad 15K and my mother 15K this year and then do the same thing next year? Or, since they are married, does this still get interpreted as a gift of 30K to one party and thus considered taxable? (not sure if they are treated differently when it comes to cash gifts)
• Is there any other way I can do this legally without having to pay taxes on this after already paying a gains tax?

Answer 1

You don't owe taxes on gifts until you reach your lifetime estate tax exemption which is currently north of eleven million dollars.

Answering your questions in order

• There's no such thing as a one-time gift.
• Yes, paying their debts off is a gift to them.
• You can gift each of them individually $15,000 this year for a total of $30,000. If you are married, your spouse could do the same. If you've got the time, this is the easiest no-paperwork way of making the gift.
• Unless you expect to have an estate worth more than $11,400,000 at the moment, you will not owe any taxes on the gift. If you gift a person more than the annual gift max, you need to file a Form 709 in the following tax year.

Answer 2

You can give more than $15K to your mother as long as you file Form 709 with the IRS (it doesn't go to the same IRS office where you file your Form 1040) and claim the excess as a deduction against your combined gift and estate tax exclusion amount of $5.4M (yes, million) (and so pay not gift tax). If you are planning on leaving an estate of more than $5.4M, perhaps you should consult a tax lawyer right now.