Question on Gift Tax

[Jarett Tigges]

Hi BP community,

Does gifting money reduce your taxable income? I know the limit is $15,000 for tax free gift, but does it reduce the gifter's income for that year? Say you make $90,000 and you want to find someway to drop into the lower tax bracket. If you gift $10,000 to a family member, does that lower you or does it have to be a gift to a charitable organization?

Let me know if you have any idea!

Thanks

[Dawn Brenengen]

@Jarett Tigges No, it does not.  Gift tax only comes into play when it comes to your estate and/or reducing the lifetime allowable gift limit, which is over 11 million dollars right now.  So, if you die, you don't need to worry about this at all unless you're estate is worth that much. 

To reduce your taxable income, you can make gifts to charity, but that is still reported on a schedule A and lumped in with your other deductions like mortgage interest and property taxes.  If you are married, the standard deduction is now 24k, so unless those items surpass 24k, any donation will not be additionally tax deductible.  I used to itemize, but not with the new Tax Act, I will not be for 2018, even with a large mortgage, property taxes and charitable contributions.