Gift-splitting by married couples is a tax provision that allows spouses to combine their individual gift allowances for tax purposes. Under this provision, when one spouse makes a gift, it can be treated as if both spouses made half of the gift. This means that each spouse can effectively double the amount they can give without incurring gift taxes.
This term is primarily used in the context of federal gift tax law. It applies when married couples wish to maximize their tax-free gifting options. The gift-splitting provision is relevant in estate planning and tax strategy, allowing couples to transfer wealth to their beneficiaries without triggering gift taxes. Users can manage their gifting strategies using legal templates from US Legal Forms, which provide guidance on the necessary forms and procedures.
Here are a couple of examples of abatement:
Example 1: A couple decides to give their child a gift of $30,000 for a down payment on a house. By electing to split the gift, each spouse can treat their share as a $15,000 gift, which is under the annual exclusion limit, avoiding any gift tax.
Example 2: A married couple wants to donate $20,000 to a charity. By splitting the gift, they can each claim a deduction for their half, maximizing their tax benefits. (hypothetical example)
The primary statute governing gift-splitting by married couples is found in the Internal Revenue Code, specifically:
| Term | Definition | Difference |
|---|---|---|
| Gift Tax | A federal tax on the transfer of property from one individual to another. | Gift-splitting is a strategy to minimize gift tax liabilities. |
| Annual Exclusion | The maximum amount that can be gifted to an individual without incurring gift tax. | Gift-splitting allows couples to effectively double this exclusion. |
If you are a married couple considering making significant gifts, you should:
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| Attribute | Details |
|---|---|
| Annual Exclusion Limit | $17,000 per recipient (as of 2023) |
| Eligibility | Must be married and agree to split gifts |
| Tax Implications | Can help avoid gift tax on larger gifts |
Gift-splitting allows married couples to combine their gift tax exclusions, enabling them to give larger gifts without incurring taxes.