Question

Gifts received are nontaxable to the recipient,but this is not where it all ends. The person giving the gift needs to consider the tax on that gift. On the other hand, there are some gifts that are not subject to the gift tax. What are those gifts? What do they mean by "gift splitting"?

Please explain with an example.

Answer 1

Answer)

Gifts not subject to gift taxes are:

1)Annual exclusions I.e if a person get less than $15000 of gifts in a year.

2) certain payments received towards education expenses.

3)Certain payments received towards medical expenses.

Gift splitting is a option available for married couples where they can split the gifts received by them during a yet under mutual consultation to maximise the gift exemption.

For example,Mr Rutherford received gifts worth $17000 during an year.The available gift tax exemption is $15000.Here,if Mr Rutherford avail the gift splitting then He and his wife get a total exemption of $30000 combined where they need not pay tax on such gift.