Do the above and you'll need to fill out a gift tax form when you file your returns, but you may still avoid having to pay any gift taxes. Now, let's really look at the details of the gift tax, the annual exclusion, and other taxes you should consider when donating money to family members. Medical donations must also be made directly to the health care provider to qualify for the unlimited exclusion of gift tax. On a gift tax return, you indicate the fair market value of the gift on the date of the transfer, its tax base (as a donor) and the identity of the recipient.
The IRS gift tax isn't the only type of tax you should consider when donating money to family members. Any gift you make during your lifetime that exceeds the annual exclusion and does not qualify as a tax-free medical and educational gift will be deducted from your lifetime exemption. But, generally speaking, this should not apply to a cash gift in the same way as it would apply to the donation of stocks or real estate. People whose assets exceed the current exemption level should also consider making donations and using these strategies while they are still available to reduce inheritance and gift taxes.
The bad news is that you'll need to file a gift tax return, but the good news is that you probably won't pay a gift tax. While no taxes are due in this situation, the first spouse would have to file a gift tax return stating that the second spouse had agreed to divide the gift. The lifetime gift tax exclusion is shared with the wealth tax, which means that the more money you give over the annual gift exclusion, the less money you can leave your heirs tax-free when you die. Submitting the form doesn't necessarily mean that you have to pay anything for the gift, it's just the form you'll have to use to declare the gift.
People who receive gifts of money or anything else of value don't need to report donations on their tax returns. This means that if you gave money to a child you're not related to, you'll still have to pay gift tax if you gave the person any amount that exceeds your exclusion threshold. While no taxes are due in this situation, the first parent would have to file a gift tax return stating that the second parent had agreed to divide the gift. Gift givers may need to report any gift to a single person who, when combined, exceeds the annual exclusion.
