Make 2023 Annual Exclusion Gifts by Dec. 31

One of the most effective estate-tax-saving techniques is also one of the simplest: making use of the gift tax annual exclusion. It allows you to give to an unlimited number of family or friends cash or property valued up to a “specified” amount each year without owing gift tax or using up any of your lifetime gift and estate tax exemption. For 2023, the annual exclusion amount is $17,000.

The annual exclusion amount is subject to inflation adjustments. For 2024, the amount will increase to $18,000 per recipient. It’s notable because the amount had been stagnant at $15,000 for several years (2018-2021) but, beginning in 2022, it has increased $1,000 each year due to higher inflation.

Each year you need to use your annual exclusion by Dec. 31. The exclusion doesn’t carry over from year to year. For example, if you don’t make an annual exclusion gift to your granddaughter this year, you can’t add your $17,000 unused 2023 exclusion to your $18,000 2024 exclusion to make a $35,000 tax-free gift to her next year.

Contact the office with questions: (408) 252-1800

Year-End Charitable Giving Tips

As we approach the end of the year, thoughts turn to generosity and gift-giving. Many people choose to do most or all their charitable gifting at the end of the year.

For those that itemize, charitable contributions are taken as an itemized deduction on their individual tax return. For tax year 2021, even if you don’t normally itemize on your tax return you can take an adjustment to your adjusted gross income of up to $300 ($600 for married individuals filing joint returns) for your cash donations.

Below is our list of year-end charitable giving tips:

  • Save all records of cash and non-cash donations
    • This includes donations made by check or credit card
    • If your donation is a cash donation of $250 or greater, you should receive a letter of acknowledgment from the receiving organization
    • Take pictures of your non-cash donation receipts
      • Goodwill
      • Salvation Army
      • Etc.
  • Consider making the donation with your credit card for cash flow purposes
    • You can make the donation by 12/31/2021 and not need to pay until the statement date in 2022
  • You may be eligible to deduct travel and out-of-pocket expenses incurred for charities
    • Must be a qualified charity and your time must be for real and substantial services to the charity
      • You cannot deduct for your time or services provided to the charity
    • Travel you can deduct (you cannot deduct travel if a significant portion of your trip is for recreation/vacation)
      • Flights and public transportation
      • Vehicle expenses
      • Lodging costs
      • Cost of meals
      • Taxi, rideshare, or other transportation costs between the airport or station and your lodging
    • Out-of-pocket expenses that can be deducted must be necessary and must be
      • Unreimbursed
      • Directly related to the time/services provided to the charity
      • Directly related to services provided
      • Not personal, family, or living expenses

Other tax-advantaged charitable giving includes Qualified Charitable Distributions (QCDs) and donations of appreciated stock or other assets.

To learn more about how your generosity can benefit you come tax time, please reach out to email@wheelercpa.com or call our office:

San Jose: (408) 252-1800

Watsonville: (831) 726-8500