You might think you can give money or property away without needing to document it on your tax paperwork, but that is not the case. At this point, you likely want to know whether or not you can give someone $1 million tax-free.
To get an accurate answer, it’s vital you know federal tax laws and consider how much you have given away in the past. As of 2018, the IRS allows you to give up to $11.1 million in your lifetime. You must also consider the $15,000 annual limit on tax-free gifts.
How It Works
The good news is that you won’t have to pay taxes even if you give someone a gift worth $20,000 in one year. The way it works is that the value of gifts over the annual limit count toward your lifetime limit. In simple terms, you can give someone $1 million in cash or property as a gift without paying as long as you did not exceed your lifetime limit.
What counts as a gift?
If you would like to know what the IRS counts as gifts, this section points you in the right direction. Any cash or property you give goes toward your annual or lifetime limit, but selling the property under the market value also counts as a gift. For example, you have a car worth $20,000 and sell it to someone for $10,000. You have given the person a $10,000 gift as far as the IRS is concerned.
If you mow the lawn for your neighbor, you have given your neighbor a gift worth what most lawn care services would charge for doing it. Medical bills and college tuition are exempt from this rule so you can give people a hand with their medical bills or student loans without paying a share to the tax man.
You can give anyone a tax-free gift of $1 million as long as you have not yet gone over your lifetime limit. The law requires you to log the value of all gifts you provide others so that it can decide when your tax obligations activate. The good news, though, is that you won’t have to keep track of your gifts if you are not a millionaire.