White Cloud, MI asked in Tax Law for Michigan

Q: I have a parent that wants to pay my loans of in one lump sum. Is it possible to avoid Gift Tax on the excess over 15k?

I know the allowable amount for a gift is up to 15k, but after that what happens? is it taxed, by how much, and is it avoidable?

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1 Lawyer Answer
Eric Steven Day
Eric Steven Day
Answered
  • Tax Law Lawyer
  • Henderson, NV

A: You can avoid paying any tax, but you will be required to file a gift tax return, Form 709, along with your normal 1040 tax return you file annually. When you pay more than the 15K allotted for individuals to gift on an annual basis, you have to file the Form 709 to record the excess gift. However, over an individual's lifetime, they are also allotted $11.2 million of unified gift and estate tax exemptions (at least until 2025 when the amount will revert back to 2017 numbers or whatever Congress determines then). Essentially, if you pay someone $30K to pay off their loans, you will file a Form 709 at which time you will indicate that the additional $15K is going to be tapping into the $11.2 million you are afforded to gift at death without tax consequences.

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