Under U.S. tax rules, transfers or gifts of property are subject to gift taxation if adequate consideration is not received by the giver. These rules are not limited to property in the U.S. and generally apply regardless of where the property is located with some exceptions.
U.S. Gift Tax Exclusions and Credits
Fortunately, there are credits, exclusions and deductions that may be available. For the 2019 and 2020 tax years individuals domiciled in and out of the U.S. can exclude annual gifts of up to US$15,000 per donee. Gifts to spouses have a higher limit. For a U.S. citizen spouse, unlimited gifts may be transferred without being subject to tax. If your spouse is not a U.S. citizen, an annual exclusion of US$155,000 for the 2019 tax year and US$157,000 in the 2020 tax year is available. A lifetime exclusion amount of US$11,400,000 in 2019 and US$11,580,000 in 2020 is available to U.S. citizens and domiciliary individuals on the transfer of assets. It is possible to apply the unified credit to offset gift tax otherwise payable. However, keep in mind that this reduces the estate tax credit.
Gifts Excluded from U.S. Gift Taxation
Fortunately, some transfers are not subject to tax and include the following qualified transfers:
- medical expenses paid to medical practitioners;
- tuition paid directly to educational institutions; and
- property settlements as part of a divorce if certain criteria are met.
Gifts exceeding the annual exclusion amount would require the filing of Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, by April 15 of the following calendar year.
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Karlene J. Mulraine, EA, CPA, CA, CPA (NH) is the President of Cross-Border Financial Professional Corporation. Follow us on Linkedin and Twitter, or hang out on Facebook.
The views expressed in this article are those of the author and should not be relied on to make decisions. Consider discussing your specific circumstances with an appropriate specialist.