January 11th, 2008
Theresa A. Harezlak, CFP®
Did you know that the federal government has established guidelines for gift tax exemptions and gift tax rates for all property? While these guidelines are generous– everyone has a lifetime gift tax exemption of $1,000,000– it’s still important for you to understand them.
In 2007 and 2008, the IRS determined that gifts under $12,000 per person, per year, were exempt from a federal gift tax. Gifts over the annual $12,000 per person limit are called “taxable gifts.” In the case of a “taxable gift,” IRS Form 709 would have to be filed. Remember, you have a lifetime gift tax exemption of $1 million, so even though you may be required to file a federal gift tax return, unless you have exceeded your $1 million lifetime exemption, you will not actually owe any federal gift taxes.
If you are married and filing joint tax returns, each of you is allowed to gift $12,000 per recipient, yearly, tax-free. In other words, if you are married and have two children, as a couple, you can gift up to $48,000 annually without having to file a gift tax return.
Another key point to keep in mind, especially if you’re gifting toward the end of the year, is that the IRS counts the gift on the day the check is cashed, not on the day the check was written.
There are other gifts that are considered exempt from gift taxes assuming they meet the following guidelines:
- Tuition expenses – Tuition payments to assist an individual’s educational cost must be made directly to the qualified institution, not the individual. The payment must be used to fund the cost of attending the school and may not be used to pay for books or other educational supplies.
- Medical expenses – Medical expenses to assist an individual must be made directly to the medical facility, not the individual. And, those expenses may not be eligible for reimbursement by any insurance coverage.
- Gifting between spouses – Gifts between spouses are unlimited.
- Charitable gifts – Gifts made to qualified charitable organizations are also unlimited.
As it is said, “giving is so much better than receiving.” While it is gratifying to give, most of us do not feel the same way about paying gift taxes. Therefore, when making a substantial gift or a series of gifts, consult with your advisors to ensure you are taking full advantage of your exemptions and not inadvertently placing yourself in a taxable position.
December 26th, 2007
Wendy M. Blair, CFSC
With only a couple of weeks remaining in 2007, a check list of things to consider may be helpful for year-end planning.
- Investments: Do you have your cost basis records updated on your non-retirement accounts? If so, is there any tax-loss harvesting that is available to you in your portfolio? Tax-loss harvesting is realizing losses to offset realized gains. Consider re-balancing the investments in all of your portfolios (both retirement and non-retirement accounts). Simplistically, rebalancing forces you to sell high and buy low. Do you have children between the magical ages of 18 and 23, then? If so, their capital gain tax rate is going up in 2008, so consider taking gains for this age group in 2007.
- Planning: When was the last time you reviewed your last will & testament and trust? When was the last time you made up a current list of all of your assets with current values? How are your assets titled? Is it time that you updated your estate plan?
- Gifting: Would you and others benefit financially and emotionally by making gifts for 2007? Annual exclusion gifts or charitable gifts?
- Retirement Accounts: Are you maximizing your contributions? If not, could your contributions be increased for 2008? Are you already retired and over 71? Have you taken your required minimum distribution for 2007? This must be done by December 31st.
- Clean-up: While you are getting all of the above in order, are there records and papers that could be thrown out? Reorganized?
Enjoy what you have accomplished and look forward to a prosperous 2008!
December 21st, 2007
Wendy M. Blair, CFSC
Stimulating the economy during the Christmas season seems to be a patriotic duty! But alas, even after some have stimulated the economy to the extent of their credit limits – there is still not satisfaction and joy. Too much money spent, too much SNOW & ICE and not nearly enough peace and tranquility. Nor really do the bearers of the fruits of our generosity seem all that satisfied or content with the results of this economic stimulation. Yet year after year we continue to attempt to out stimulate the last until at some point it occurs to us that we can no longer even enjoy the Holiday Season. So, my recommendation and wish to everyone is this: Keep your focus. Don’t give too much to those who really only need your love, time, and support. Give more to those who really need your financial gifts and who will really appreciate them. This will give others a chance to truly enjoy the Holiday Season.
Theresa A. Harezlak, CFP® 
