Legal-Ease: How much can I gift this year without reporting it?

Recently I have found myself shopping for birthday gifts for many family members, including my husband and multiple nephews, all of whom have March birthdays. Luckily for me, they are spread out with a birthday seemingly every week, giving me time to look for the perfect gift for each of them.

Anyone who knows my family, especially my mom and sister, knows we love to find the perfect gifts for people, which I am sure many can relate to.

Or if you do not like to give gifts, then you may have family members who are trying to give you items to clean out their house, so there is less to go through when they pass away.

But what legally is considered a gift? Most people know money is considered a gift. But a gift also includes items of value, or the use of property, when there is no expectation of receiving something of at least equal value in return.

Further, if you discount the sale price of an item, then the difference between the sale price and the fair market value of that item is also considered a gift. In other words, if I sell my dolphin figurine collection to my sister for $1,000 less than the dolphin figurine collection’s fair market value, I have given my sister a $1,000 gift. (To be honest, my dolphin figurine collection’s fair market value is not worth $1,000, but I like to think it has some value.)

Beginning in 2024, federal law allows a person to give away up to $13.61 million during a person’s lifetime before the gift giver must pay tax. Ohio law does not tax gift givers, and recipients of gifts do not pay tax on the gifts received.

If any one person gives any other one person more than $18,000 worth of gifts in 2024 (which is expected to increase again in 2025), the gift giver must inform the IRS, and the value of the gift is deducted from that gift giver’s $13.61 million lifetime (and afterlife) allowance.

If any one person gives any other one person $18,000 or less worth of gifts in that calendar year, the IRS does not even want to know about the gifts. (That’s a good thing because imagine having to do a gift tax return every time you gave a birthday gift or bought someone a drink. We would all spend more time keeping track of our expenses for our accountants than arguably the birthday gift or a drink might be worth.) So thankfully, gifts in any one calendar year under $18,000 to any one person do not count toward the lifetime (and afterlife) $13.61 million allowance.

Additionally, gifts between spouses do not count toward the annual and lifetime amounts under federal law. That’s helpful in estate planning contexts, since gifting is often times coupled with gifts after a person’s death, such as through a will or trust.

Nichole Y. Shafer is an Ohio-licensed attorney at Schroeder Law LTD in Putnam County. She limits her practice to business, real estate, estate planning and agriculture issues in northwest Ohio. She can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.