Do I owe taxes if I gift more than $15,000?

As we begin the last quarter of the year, some taxpayers begin to question whether it would be smart to gift some of their estates to their children or others or to charities on the theory that it would leave less to be taxed on their death. They understand they have heard something about limiting gifting to $15,000 a year but do not understand what that means. Charities, of course, hold a different position since gifts to charity can reduce taxes now.

These questions obviously arise in cases where taxpayers have what they consider to be excess assets and not where there is need.

The first thing I do for such taxpayers is to assure the questioner that the government does not prohibit gifting in any amount and the limitation they are thinking of concerns whether or not a Gift Tax Return is expected to be filed by the following April 15. Filing a gift tax return does not necessarily mean that taxes are due and, in fact, because of the very high estate and gift tax exemption — in 2020 $11.58 million per person — it would be very rare that gift tax would be owed.

There can be tax issues relative to an idea called “basis” and there is something called the annual exclusionary gift that requires some explanation. Even there, that figure (currently $15,000) has less significance than it used to have.

So here is how it goes.

In 2020 the annual exclusionary gift is $15,000. If you give away up to but not more than $15,000 per person in a calendar