Tax lawyers should be consulted if people are giving away large amounts of cash, or other high value items such as cars or real estate.
Louisville, KY – People give each other items of value and money all of the time without needing to exchange labor and services. This is common among family members and friends. While small transactions generally do not have any tax consequences, it can be important to understand how gifts work for tax purposes, especially if a person is giving or receiving large amounts through gifts. Lawyers should be consulted by anyone who needs tax advice about serious matters.
Why is the concept of a gift important?
The government has a strong desire to tax all kinds of transactions. Gifts are a financial transaction that the IRS will want to tax if they can, and they also try to prevent people from simply gifting away large amounts of money to other parties to avoid tax consequences. However, not all gifts are taxed, and it is possible to give money away in some cases without the government being involved. Louisville tax lawyers can advise those who plan on transferring substantial amounts of wealth as gifts.
Gifts that are tax free
People should not be concerned about giving away a few thousand dollars or less each year when tax time comes around. A person can give away approximately $17,000 in gifts annually to one other person. This amount can also be subtracted out of any larger gifts that are transferred each year. However, Kentucky tax lawyers will advise their clients that the government tends to change this number slightly each year, and they should be aware of these changes. As a general rule, money can be given to charities or a person’s spouse in any amount without being considered a taxable gift. Funds used to directly pay a person’s medical bills are not taxable in this manner either.
Who needs legal advice about gifts?
Tax lawyers should be consulted if people are giving away large amounts of cash, or other high value items such as cars or real estate. The amount of tax that is owed can depend on things like how much the item is worth based on its fair market value. Gifts that are money or cash only will be taxed based on the amount once the threshold is passed.
Gifts and estate planning
It is most likely that people near the end of their lives will want to set up various testamentary documents to transfer their wealth. This normally includes wills, trusts, life insurance, and other means that estate planning lawyers can explain more thoroughly. It can be beneficial for someone who is at this stage of planning to speak with an attorney and figure out the tax consequences of their transfers and what options are best in their situation.
More information about tax law is available
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