Sign Up Today to Receive Our Newsletter!

Please note our privacy policies.

Please wait...

Thank you for signing up! We strive to deliver great content to you. -The Walkner Condon Team

Gifting Limits

What Is The Gift Tax and Are We Misinformed On How It Works?

Oct 15, 2019 | Financial Concepts

One of the frequent things that pop up in the context of financial planning is the notion of gifting, particularly the $15,000 “limit” on gifts to non-spouses.  

This $15,000 “limit” (in 2019) isn’t really a limit. One can give more than $15,000 per year, but should they give more than $15,000, you will need to file a federal gift tax return form (Form 709). This amount would then be deducted from your total estate tax exemption. This exemption currently is quite significant: currently approximately $11.2 million for an individual and $22.4 million for a couple; moreover, gifts given under current U.S. estate tax exemptions would likely be grandfathered in should the current levels not be renewed when they are due to expire in 2025.  

As an example, should a grandfather wish to help his granddaughter buy a house, he could give her $100,000, file a Form 709 and still have an exemption of $11.1 million (an amount that only affects about 0.9% of Americans currently). Alternately, he could, in December 2019 and then January of 2020, give his granddaughter and her spouse $15,000 each for a total of $60,000 without having to either file Form 709 or reduce his exemption amount. Obviously, when the exemption amounts were lower, such a strategy was more relevant, but given the current estate tax landscape, the former strategy of a straight $100,000 gift is advantageous.

The second question is what to give. Generally, cash is the preferred gift, because investments come with a step-up in basis at death, eliminating any possible capital gains tax. Again, as an example, should the grandmother give $100,000 of IBM stock that she bought in 1965 with a cost basis of $1,000 — the grandson would have to pay between 15% and 23.8% on the $99,000 of gains; whereas should the grandmother leave that as an inheritance the new cost basis would be stepped up to the value on death and the family would avoid approximately $15,000 to $20,000 in taxes. (As a side note, capital gains taxes mean that it is advantageous to give stock directly to charity, rather than selling it first. This means more for the charity in the end, as the charity will not have to pay taxes on the capital gains. For more on charitable giving, read Mitch’s blog on the topic). Consequently, a good rule of thumb is to give cash to family and appreciated assets to charity.    

Given the long-term changes to the estate exemption amount, a strategic giving plan in the United States is less important in terms of limiting estate tax exposure than it once was; however, making sure to gift wisely can still impact one’s overall tax bill.

Keith Poniewaz


Walkner Condon Financial Advisors is a registered investment advisor with the SEC and the opinions expressed by Walkner Condon Financial Advisors and its advisors in this piece are their own. Registration with the SEC does not imply a certain level of skill or training. All statements and opinions expressed are based upon information considered reliable although it should not be relied upon as such. Any statements or opinions are subject to change without notice.

Information presented in this piece is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed.

Information in this piece does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Readers are encouraged to seek advice from a qualified tax, legal, or investment adviser to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.