Ask Terry Questions Gifting individuals more that $16,000 in year 2022, and the tax or financial penalty that willi incurred from the IRS

Gifting individuals more that $16,000 in year 2022, and the tax or financial penalty that willi incurred from the IRS

By Terry Savage on May 18, 2022 | Financial Planning / Retirement

For year 2022, a U.S. citizen is allowed to give maximum $16,000 without any tax or financial penalty to as many individuals as desired, and also without any effects on his/her future potential federal IRS estate tax when he/she later dies.
Question:
If an individual gives more that $16,000 to someone in 2022, what financial or other penalties will be incurred from the IRS, for exceeding this maximum $16,000 limit in any one year?

Terry Says

There is no penalty. You can give an unlimited amount. But for amounts over $16,000, that excess will be added to your combined estate and gifts at death. And, under current law, unless that amount exceeds $12 million, it will not be taxed by estate taxes. Check with your state, though because some have inheritance taxes that tax this combined amount (total estate at death plus gifts in excess of the annual exclusion) and their taxes may start at a much lower level of total assets.

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