If you donate more than the exclusion to a recipient, you'll need to submit tax forms to disclose those donations to the IRS. Do the above and you'll need to fill out a gift tax form when you file your returns, but you may still avoid having to pay any gift taxes. People whose assets exceed the current exemption level should also consider making donations and using these strategies while they are still available to reduce inheritance and gift taxes. Once you have exceeded the lifetime exclusion amount, you will be subject to gift tax rates of between 18 and 40% of the gift amount.
While no taxes are due in this situation, the first parent would have to file a gift tax return stating that the second parent had agreed to divide the gift. People who receive gifts of money or anything else of value don't need to report donations on their tax returns. Medical donations must also be made directly to the health care provider to qualify for the unlimited exclusion of gift tax. On a gift tax return, you indicate the fair market value of the gift on the date of the transfer, its tax base (as a donor) and the identity of the recipient.
Any gift you make during your lifetime that exceeds the annual exclusion and does not qualify as a tax-free medical and educational gift will be deducted from your lifetime exemption. While no taxes are due in this situation, the first spouse would have to file a gift tax return stating that the second spouse had agreed to divide the gift. If you want to calculate the taxable income for donations that exceed the annual exclusion limit, the following table breaks down the rate you'll have to pay based on the value of the gift. In other words, if you write a big check, give away some investments, or give a car to someone other than your spouse or dependent, you've made a donation.
The bad news is that you'll need to file a gift tax return, but the good news is that you probably won't pay a gift tax. A Crummey power of attorney allows a trust beneficiary to withdraw a gift from a trust within a specified period after the gift has been made. Gift givers may need to report any gift to a single person who, when combined, exceeds the annual exclusion. So you don't have to worry about paying gift tax on, for example, a sweater you bought for your nephew for Christmas.