Gift Tax

The gift tax annual exclusion amount has increased to $15,000 per recipient in 2018, which is up from $14,000 in 2017. In this situation, individuals owning a privately held company would be eligible for the same gift tax exemptions and annual exclusions with regard to transfers of ownership interests. In addition, the generation-skipping transfer tax rules that applies to gifts to grandchildren and younger generations will receive the same exemption benefit.   

What can this mean for small or private business owners? 

It means that the time to protect the future of your heirs and your business is now! Gifting stock and/or real estate to your next of kin can reduce or defer a tax bill in the future. Just remember, when gifting non-cash assets, the IRS requires an appraisal to confirm the value of the asset being gifted.

Gifting strategies to consider every year 

For small or private business owners, individuals, and investors with an eye on reducing taxes, there are certain gifting vehicles that make it possible to pass assets to the next generation or to the charities of their choice, tax free. These strategies include:

    • Annual exclusion gifting. The annual exclusion increased from $14,000 in 2017 to $15,000 in 2018. This means that you can gift $15,000 per individual, or $30,000 for a married couple, to as many individuals as you would like, without eating into your lifetime exemption. The $15,000 does not have to be a cash gift. Stock gifts are an acceptable exemption when properly appraised and reported.
    • Making tax-smart charitable contributions. Donating long-term appreciated securities may be a particularly tax-savvy strategy. As a general rule, donations of long-term appreciated securities (either stocks or mutual funds) directly to a qualified charity are deductible at their fair market value on the date of contribution, and you don't pay capital gains taxes on them. Again, when donating stocks or mutual funds, a business valuation is required to verify the value of the non-cash asset, unless the securities are publically traded.
    • Direct payments of education and medical costs. Direct payments to educational institutions or medical providers for another individual do not constitute a gift. Therefore, the donor may want to keep this consideration available when looking to maximize the benefit of making additional payments on behalf of the Donee.

Please contact Frank Merenda at frank.merenda@SobelCoLLC.com for further information.