I Want to Give My Grandchild $15,000. Is It Taxable?

Do you plan to give your grandchildren a generous financial gift for a birthday, wedding or special occasion? If so, it’s wise to understand how gift taxes work so that you aren’t caught off guard. 

A gift tax is a federal tax imposed on the transfer of money or property from one person to another without receiving full value in return. It is designed to prevent individuals from avoiding estate taxes by giving away their assets before death. In the U.S., the IRS sets an annual exclusion limit, allowing individuals to give a certain amount per recipient tax-free each year. Gifts exceeding this limit may count toward the giver’s lifetime exemption, which is the total amount a person can give over their lifetime before incurring gift tax. Some transfers, such as gifts to spouses, charitable donations, and payments for medical or educational expenses made directly to institutions, are exempt from the gift tax. The responsibility for paying the gift tax typically falls on the giver rather than the recipient.

There are many ways to avoid paying gift taxes, such as medical expenses and college tuition, according to a recent story from AARP.

To read more about how gift taxes work and considerations to keep in mind when giving gifts to your grandchildren, from AARP, CLICK HERE.