Lets talk about the IRS Annual Gift Tax Exclusion! If you are thinking of buying a new home or someone near and dear to you is thinking of buying, this may help!  You can receive or make a significant cash gift for use toward that purchase if you plan ahead.

The House and the Senate are currently reconciling a tax bill that will bring many changes, but I am assuming for now that the guidelines pertaining to gifts will not change.  In that case, the IRS annual gift tax exclusion amount will stay at $14,000 per person for this year. Then the exclusion amount will increase to $15,000 per person in 2018.  This is totally separate from the lifetime gift exemption, so let’s just focus on the annual amount for now.

IRS Annual Gift Tax ExclusionLet’s say you are a young couple looking to purchase their first home.  Let’s call them Romeo and Juliet.  Romeo’s parents agree to gift him $28,000, as each parent can make the annual gift of $14K to their son.  If they do this in early December of 2017, Romeo will have $28K in his account that he can use towards his home purchase.  But let’s say the property search lasts into January.  Now, assuming they’re financially capable, Romeo’s parents could make another, combined, $30K gift to Romeo in 2018 and still meet the IRS Annual Gift Exclusion threshold. (The IRS Annual Gift Tax Exclusion is set to increase in 2018 to $15,000 per person.) Romeo just more than doubled his gift funds available, and his folks, just by careful timing, effectively doubled their excluded gifts in the eyes of the IRS.

Then,  each of Romeo’s parents could give $14K  to Juliet also because she is such a sweet daughter in law.  That’s $56K total in this year AND another $60 K on January 1.  Don’t read the guideline and think $14K! It is possible to gift $116 K without triggering the annual gift exclusion restrictions.

If financially possible, get your first gifts underway in this calendar year, and then double them once January arrives.  While I am partial to fruitcake, this is clearly a better holiday gift!

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