What is the impact of gift tax on my financial planning?

What is the impact of gift tax on my financial planning?

The gift tax can affect your financial planning by limiting how much you can give without incurring taxes. It’s important to understand the annual exclusion limits and how they can impact your estate.

What are the current annual exclusion limits for gift tax?

As of 2023, the annual exclusion limit for gift tax is $17,000 per recipient. This means you can give up to this amount without triggering the gift tax.

How does the gift tax affect my estate tax?

Gifts made during your lifetime can reduce the size of your taxable estate, potentially lowering your estate tax liability. However, large gifts may also use up part of your lifetime exemption.

Are there any strategies to minimize gift tax?

Yes, strategies include making use of the annual exclusion, gifting to charities, and setting up trusts. Consulting a tax advisor can help tailor a plan to your situation.