The IRS defines a gift as “any transfer to an individual, either directly or indirectly, where full consideration is not received in return.” in other words, if you write a big check, gift some investments or give a car to someone other than your spouse or dependent, you have made a gift.Application of cognitive learning theory the IRS has a gift tax limit, both for the amount you can give each year and for what you can give over the course of your life. If you go over those limits, you will have to pay a tax on the amount of gifts that are over the limit.Application of cognitive learning theory this tax is the gift tax.

In almost every case, the donor is responsible for paying gift tax, not the recipient. A recipient will only pay gift tax in special circumstances where he or she has elected to pay it through an agreement with the donor.Application of cognitive learning theory even though recipients don’t face any immediate tax consequences, they can face capital gains tax if they sell gifted property down the line.Application of cognitive learning theory

The annual gift tax exclusion is $15,000 for the 2019 tax year. (it was the same for the 2018 tax year.) this is the amount of money that you can give as a gift to one person, in any given year, without having to pay any gift tax.Application of cognitive learning theory you never have to pay taxes on gifts that are equal to or less than the annual exclusion limit. So you don’t need to worry about paying the gift tax on, say, a sweater you bought your nephew for christmas.Application of cognitive learning theory

The annual gift exclusion limit applies on a per-recipient basis. This gift tax limit isn’t a cap on the total sum of all your gifts for the year.Application of cognitive learning theory you can make individual $15,000 gifts to as many people as you want. You just cannot gift any one recipient more than $15,000 within one year.Application of cognitive learning theory if you’re married, you and your spouse can each gift up to $15,000 to any one recipient.

If you gift more than the exclusion to a recipient, you will need to file tax forms to disclose those gifts to the IRS.Application of cognitive learning theory you may also have to pay taxes on it. If that’s the case, the tax rates range from 18% up to 40%. However, you won’t have to pay any taxes as long as you haven’t hit the lifetime gift tax exemption.Application of cognitive learning theory the lifetime gift tax exemption

So let’s say that in 2019 you gift $215,000 to your friend. This gift is $200,000 over the annual gift exclusion.Application of cognitive learning theory that means you will need to report it to the IRS. However, you won’t immediately have to pay tax on that gift. Instead, the IRS deducts that $200,000 from your lifetime gift tax exemption.Application of cognitive learning theory assuming you have never made any other gifts over the annual exemption, your remaining lifetime exemption is now $11.2 million ($11.4 million minus $200,000).Application of cognitive learning theory

The federal government will collect estate tax if your estate has a value of more than the federal estate tax exemption. The exemption for 2019 is $11.4 million.Application of cognitive learning theory at the same time, the exemption for your estate may not be the full $11.4 million. You can only exempt your estate up to the amount of your remaining lifetime gift tax exemption.Application of cognitive learning theory so let’s say that you have lowered your lifetime exemption down to $10 million by making $1.4 million in taxable gifts. The federal government would then tax any estate that you pass on to someone for all value over $10 million.Application of cognitive learning theory in other words, the gift tax and estate tax have a single combined exclusion. Regardless of whether the gift passed to the recipient before or after your death, it applies toward that same $11.4 million limit.Application of cognitive learning theory

Taxable gifts can include cash, checks, property and even interest-free loans. It also applies to anything you sell below fair market value. For instance, if you sell your home to your non-dependent child for $175,000 when it’s worth $250,000, the $75,000 difference could be considered a gift.Application of cognitive learning theory that surpasses the annual gift tax limit and thus is deducted from your lifetime gift tax limit.

Funds that cover educational expenses refer only to tuition.Application of cognitive learning theory that does not include books, dorms or meal plans. You can skirt the gift tax by contributing to someone’s 529 college savings plan with a lump sum and then spreading it over five years for tax purposes.Application of cognitive learning theory the IRS allows taxpayers to donate $75,000 into a 529 plan without paying tax or reducing the $11.4 million lifetime limit. The only caveat is that any additional gifts for the same recipient will count toward your lifetime limit.Application of cognitive learning theory

If you live in connecticut, you may also have to file a state gift tax return. It is the only state that has its own gift tax as of 2019. In most cases, you can file a gift tax return on your own.Application of cognitive learning theory if your transfers are large or complicated, consider finding a financial professional. CPAs and tax attorneys should be comfortable and confident with gift tax limits, rules and paperwork.Application of cognitive learning theory the bottom line

The IRS allows every taxpayer is gift up to $15,000 to an individual recipient in one year. There is no limit to the number of recipients you can give a gift to.Application of cognitive learning theory there is also a lifetime exemption of $11.4 million. Even if you gift someone more than $15,000 in one year, you will not have to pay any gift taxes unless you go over that lifetime gift tax limit.Application of cognitive learning theory you will still need to report gifts over the annual exclusion to the IRS via form 709. The IRS will lower your remaining lifetime exclusion over time and then use that amount to determine how much of your estate you need to pay estate tax on.Application of cognitive learning theory tips for getting through tax season

• if you’re gifting large enough amounts that you’re flirting with the gift tax, then you should probably be working with a financial advisor who can manage and invest your wealth.Application of cognitive learning theory if you don’t already have an advisor, you can find one today with smartasset’s free advisor matching tool. Simply answer a few questions about your financial situation and goals, and the program will pair you with up to three financial advisors in your area.Application of cognitive learning theory

• one way to maximize your deductions is to use the right tax filing service. Two of the best filing services, H&R block and turbotax, both offer tools to help you maximize your deductions.Application of cognitive learning theory and while both services are easy-to-use, certain taxpayers may prefer one over the other. Here’s a breakdown of H&R block vs. TurboTax to help you decide which is best for you.Application of cognitive learning theory