Honesty In Accounting

I still remember the first time I filed taxes for my business. In addition to having no idea what a write-off really was, I also didn't worry too much about guessing on the numbers. A few government audits later, I discovered what it really meant to do things the right way. Over the years, I have met lots of business owners that weren't too worried about fudging the numbers, and nearly all of them have run into problems. Proper accounting is important, which is why I created this website dedicated to business accounting. I know that if you learn the right way to do things and focus on integrity, your business can avoid a world of problems.

Giving Large Gifts? 5 Ways For Everyone To Avoid Paying Taxes On Them


If you're in the position to give a large gift to someone in your life, make sure that it doesn't cost you or them anything extra when tax time comes. How can you do that? Here are five ways to avoid tax complications.  

1. Use the Tax Exclusion. The first thing to understand when planning a large monetary gift is the gift tax. Generally, if you give a financially valuable gift to an individual — no matter whether it's cash, assets, stocks, property, or even the value of goodwill — you may have to pay tax on the gift. The receiver generally isn't liable for this gift, but you can avoid it altogether by keeping the gift under the exclusion limit of $15,000 annually.

2. Designate Gifts for Individuals. The gift tax exclusion applies to individuals, so you can give up to the maximum to each spouse, even if they're married and file jointly. In addition, the gift tax applies to each taxpayer, so your own spouse can give an additional $15,000 without tax liability on either end. In the end, this means you both can gift up to $60,000 to a married couple if you do the reporting correctly.

3. Know Other Exclusions. In addition to the catch-all gift tax exclusion limit, you may also be able to gift more money without tax consequences. For example, if you gift money to pay for someone's medical or tuition expenses, those funds generally do not count toward that $15,000 gift tax exclusion. Make sure that the educational or medical expenses qualify for the exclusion before deciding.

4. Use an IRA. Does the recipient work for income? Then you can generally contribute tax-free to their Individual Retirement Account up to the amount of their earned income — and they won't have any tax implications either. This is a great option for young family members who don't pay much (or anything) in taxes, because if you use a Roth IRA, they can withdraw money from the account later in life without paying taxes either on earnings or interest.

5. Spread it Out. If you want to give a significant amount of money, make a plan with the recipients to receive the money over the course of several years. This avoids the gift tax and any related entanglements, but it also reduces your estate if it's at any risk of being subject to the estate tax if you pass away.

Giving gifts to family and friends is a wonderful way to use your portfolio to leave a lasting legacy. To learn more about ways to avoid tax problems as a result of financial giving, consult with an experienced accountant. For more information, contact your local tax services.


7 August 2018