Gifting Confusion
I thought the IRS gifting rules were pretty straight forward and I understood them. Any individual can give $19K (in 2025) to anyone else w neither a gift tax or reporting requirement. Seems pretty clear.
Then I dug a little deeper online which was maybe a mistake and came up w some issues.
One was the IRS reference to "gift splitting" by spouses where one spouse can use the other spouses gift exemption to gift in excess of the $19K. So, if spouse #1 wants to gift $25K to a child, he can use use his $19K exemption and $6K of his spouse's exemption assuming spouse had room remaining in their $19K exemption. But if you do this, it requires filing the IRS Form Gift Tax 709.
My understanding is spouses can freely gift to one another w no reporting requirement and any gift made from a joint account is considered to have equally come from each party so why would anyone want to go through the reporting hassle of "gift splitting"? Is this only applicable where one spouse wants to make a gift to another party from an account that he does not jointly hold with his spouse? If so, wouldn't the spouses want to just transfer $$$ to a jointly held account and gift from there to avoid the 709 reporting? What am I missing?
Also, is there any requirement to make individual $19K distributions from a joint account or is one $38K distribution ok under the assumption that $19K came from 2 joint accountholders thus no gift tax and no reporting requirement?
Finally, are there any "innovative" ways to exceed the reporting limits? I read one scenario where a gift from a parent well in excess of the yearly exemption was structured as a loan with the yearly repayments structured to coincide with the gift tax exemption and would then be forgiven. Does that pass the smell test? The glitch I see is if the "loan" is to assist in a mortgage application, would this not adversely affect the recipient's debt ratios and credit worthiness or does documenting the downstream payment forgiveness make everyone happy?
I could also be overthinking this whole thing and I should just make whatever gift I/we want and fill out the IRS 709. I'm just trying to avoid unnecessary administrative filings while staying administratively pure with Government.
Then I dug a little deeper online which was maybe a mistake and came up w some issues.
One was the IRS reference to "gift splitting" by spouses where one spouse can use the other spouses gift exemption to gift in excess of the $19K. So, if spouse #1 wants to gift $25K to a child, he can use use his $19K exemption and $6K of his spouse's exemption assuming spouse had room remaining in their $19K exemption. But if you do this, it requires filing the IRS Form Gift Tax 709.
My understanding is spouses can freely gift to one another w no reporting requirement and any gift made from a joint account is considered to have equally come from each party so why would anyone want to go through the reporting hassle of "gift splitting"? Is this only applicable where one spouse wants to make a gift to another party from an account that he does not jointly hold with his spouse? If so, wouldn't the spouses want to just transfer $$$ to a jointly held account and gift from there to avoid the 709 reporting? What am I missing?
Also, is there any requirement to make individual $19K distributions from a joint account or is one $38K distribution ok under the assumption that $19K came from 2 joint accountholders thus no gift tax and no reporting requirement?
Finally, are there any "innovative" ways to exceed the reporting limits? I read one scenario where a gift from a parent well in excess of the yearly exemption was structured as a loan with the yearly repayments structured to coincide with the gift tax exemption and would then be forgiven. Does that pass the smell test? The glitch I see is if the "loan" is to assist in a mortgage application, would this not adversely affect the recipient's debt ratios and credit worthiness or does documenting the downstream payment forgiveness make everyone happy?
I could also be overthinking this whole thing and I should just make whatever gift I/we want and fill out the IRS 709. I'm just trying to avoid unnecessary administrative filings while staying administratively pure with Government.
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