Are gifts to family deductible?
This is an especially important question if you have a large estate and are looking for ways to minimize its value. The answer, however, is no. Only gifts to qualifying charities are deductible. That doesn't mean that giving gifts to family is not a good idea. While they are not deductible for you, gifts to family members or others may not be taxable for the recipient, provided they meet the following general rules:
- They are gifts that do not exceed the annual exclusion, which is $14,000 for 2014, or $28,000 per married couple. This means, for example, that you can give $14,000 -- or $28,000 if you're married filing jointly -- to each child, and those gifts will not be taxed as income.
- They are tuition or medical expenses that you pay on someone's behalf.
- They are gifts to your spouse.
If you have a large estate, annual gifts up to the exclusion limit can be a way to lessen the value over time and help out family members while you're still alive to enjoy it.