irstaxblognow.com

With tax season soon upon us, we are all reminded of how absurdly complex the tax code is. However much though the tax code as a whole is attractive intimidating, there is the occasional provision that is relatively simple to apply that can be a welcome relief to grandparents or parents keen to lend a helping palm. One of these provisions allows you to pay someone else’s medical or educational expenses without getting caught up in the federal gift tax. The federal gift tax is one of three major taxes imposed when transferring assets between generations. Incidentally, the federal gift tax is also the only one of the three currently in effect. The federal estate tax and the generation skipping transfer tax have both lapsed and will not be in effect for the remainder of 2010 unless Congress reinstates them. However don’t celebrate yet, they both come back in 2011. The common rule regarding gifts is that anytime you transfer something of value to another person without receiving something of equal value in giveback, you have made a gift subject to the federal gift tax.
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