It’s hard to believe that August is already upon us. As always, we encourage our clients to review their tax and financial plans throughout the year to ensure they are taking advantage of as many opportunities as possible and remain on track to reach their financial goals. While there is still plenty of time to act, make sure you have reviewed your annual gift giving plans.

As a reminder, in 2015 the annual gift tax exclusion is $14,000, meaning you can give up to $14,000 to any individual without gift tax consequences. If you are married, your spouse can also give $14,000 to the donee, doubling the tax-free amount to $28,000 per person. Any unused annual exclusions cannot be carried forward to future years and are lost forever. Excluded annual gifts are removed from your estate along with any future appreciation.

Also keep in mind that any payments made directly to an educational institution on behalf of another don’t count against the $14,000 gift tax exclusion. The same can be said of direct payments made for another’s medical expenses. If the beneficiary of the payment is not a dependent, you will not receive a medical expense deduction when you file your tax return, however the payments will reduce your taxable estate without reducing your annual exclusion. Contributions made to 529 Plans qualify for the annual gift tax exclusion, however a special election may be made which would allow you to contribute up to $70,000 per child this year gift tax free. If you do so, your $14,000 exclusion will have be deemed to have been already reached for that child for the next 5 years (2015-2019).

Donations to charities can be especially beneficial when you gift appreciated assets such as stocks and mutual funds. If your have owned the asset for more than one year, you will typically receive a deduction for the full value of the asset and escape any capital gains tax that would otherwise be due if the asset was sold instead of gifted. Just remember that if your adjusted gross income is greater than $258,250 ($309,900 for married taxpayers), your deduction for charitable contributions will be reduced. If you wish to gift assets that have declined in value, you will be much better off to sell the assets and gift the proceeds to charity instead. Doing so will allow you to deduct the loss on the sale as well as the amount of the gift as a charitable contribution.

As always, if you have questions regarding your gifting plan, feel free to contact our office for assistance.

Stephen Osborne, CPA
Certified Public Accountant
sosborne@mo-cpa.com