Year End Gifting – What you Need to Know

Many clients ask us, how much can I give to my kids each year? The answer is twofold:

1.  For Tax Purposes - The current annual gift tax exclusion for IRS purposes is $15,000 (2018).  This means that if you give $15,000 or less to any one individual during the tax year, you do not need to report the gift to the IRS. Keep in mind that you can gift up to $15,000 to as many individuals as you like and there is no limit on gifts between spouses.  If you gift more than that amount to any one individual during the tax year, you are required to file a gift tax return with the IRS, but no tax will be due on a gift unless your overall lifetime gifts exceed $11.18 million (the 2018 exemption).

2. For Medicaid Purposes - Now, the catch is that regardless of what the IRS says, your gifting may result in a penalty if you need to apply for Medicaid long-term care coverage within five years following the gift because of the look-back period under the Medicaid rules. The penalty period is calculated based on the amount of the gifts you have made in the past five years. The effect of the penalty is that you will need to wait to become eligible for Medicaid benefits.