Gift-Splitting
Gift splitting is a strategy that allows married couples to combine their individual gift tax exclusions to give larger gifts without incurring gift taxes. Each person can give up to a specific annual exclusion amount (e.g., $17,000 in 2023) to as many individuals as they want without tax consequences. By electing gift splitting, each spouse can treat gifts made to a third party as being made one-half by each of them. This effectively doubles the amount they can gift tax-free to an individual, allowing for better financial planning and wealth transfer strategies.
Additional Insights
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Gift-splitting is a tax strategy that allows married couples to combine their annual gift allowances when giving gifts to individuals. For example, in the United States, each person can gift up to a certain amount each year tax-free. By electing gift-splitting, a couple can jointly gift up to double that amount to someone. This is particularly useful for high-value gifts, as it helps the couple stay within tax limits and avoid gift taxes. It’s typically reported on tax returns and requires both partners to agree to the arrangement.