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Last Updated: Jul 2nd, 2008 - 21:15:22 |
Give to Receive: Five Tax Tips
(NewsUSA) - As the holidays approach, making lists of who was naughty, who was nice and what kind of gifts you'll be handing out becomes a priority.
But with the tax year closing just after the holidays, it can't hurt to think about how gifting can reduce your tax burden.
According to Jim Tyrpak, CLU, ChFC, AEP, MSFS, president of the Society of Financial Service Professionals, there are more than a few ways being charitable can benefit you as much as the gift receiver.
Get in the spirit of giving with the following tips to reduce your 2007 federal estate taxes:
* Watch the calendar. In 2007, individuals are excluded up to $12,000 from Federal Gift Tax ($24,000 for split gifts by married couples) for gifts made to any one individual. Ensure that your gift qualifies by making it in time for your check to clear.
* Lifetime exclusion. Individuals and married couples can avoid gift tax on gifts over $12,000 by utilizing their lifetime exclusion up to $1 million. A gift tax return should be filed.
* Education and medical. Individuals can gift more than $12,000 if the gift is intended to cover education or medical expenses. Gifts should be paid directly to the provider.
* Invest. Under a special election, an individual can accelerate up to five years' worth of their annual exclusion if the funds are invested into a 529 college savings plan ($60,000 per individual and $120,000 for married couples for 2007).
* Give to a charity. Don't need all your IRA funds? New in 2007, an owner of a traditional IRA can direct the custodian to make distributions directly to public charities. Transfers up to $100,000 will be excluded from income. This exclusion is available to IRA owners over age
70 1/2 through 2007. Distributions count toward the donor's required minimum distribution.
Consider gifting appreciated stock or property to charity in lieu of cash in order to avoid paying capital gains tax. Stock or property should be donated to the charity in kind, and then the charity should sell the gifted stock or property.
Have an old life insurance policy you no longer need? Consider gifting it to a charity. If the charity owns -; and is the beneficiary of -; the policy, any subsequent premiums paid by the donor are deductible as a charitable contribution.
For more information, visit www.financialpro.org.
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