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Exemption Federal Tax

Virtually all the taxes imposed on the federal level come complete with various exemptions that help, at least to some extent, ease the burden on taxpayers.

For example, you are exempt from filing a gift tax form as long as you give less than $13,000 annually to each individual on your gift list. Thought it might behoove you to fill out and file Form 709 with the IRS, you're not legally required to. It just it could keep you out of trouble down the road. It's just giving the IRS a 'heads up' and reminding them that you're honest, have nothing to hid and that you're there for them, (as they are for you).

Each year you can scroll down your list of friends and family who you want to be generous to and give up to $13,000 to a single donee (the receiver of your largesse). And if you're married, your spouse and yourself can jointly give away up to double that per single individual, ($26,000) and you won't have to pay gift taxes and your heart feels lighter and you'll smile more, oh, and your estate tax exemption remains intact. What if you give more than that, you say? Well, once again, you should file IRS form 709, the federal gift tax return. This time it is usually required when you make a gift over $13,000 to an individual or several gifts to one person that add up to more than $13,000 in one year. Don't worry, though. You don't owe the government anything (in this context, of course), unless your cumulative taxable gifts go over your $1 million gift tax exemption.

But you must file Form 709 whenever you give more than $13,000 in cash, property or other values to a single individual in a single year.

Speaking of the $1 million gift... when you sell your house to a family member for say, $300,000 and you believe that that is the fair market value of said house, you should file a Form 709 right away. Disclose that sale immediately to the IRS because they have only three years to challenge the home's value (or the value of any sizable gift). The house may have been worth what you said it was when you sold it but if you die and the house goes up in value say to $400,000, then the IRS will call that transaction a gift and your estate and the purchasing family member will suffer. Just file the 709.

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