How can donations be optimally planned for tax purposes?
January 13, 2023 | 50,00 EUR | answered by Lina Walter
Dear tax advisor,
My name is Clara Bahr and I would like to know how to optimally plan gifts for tax purposes. The background is that I plan to gift my son a larger sum of money to financially support him. However, I am concerned that high gift taxes could apply and therefore would like to plan in advance to minimize them.
Currently, my assets exceed the tax-free allowance for gifts and I am unsure of the best course of action to reduce the tax burden. I want to ensure that my son can keep as much of the gift as possible and does not have to give up a large portion in taxes.
What are the options for optimal tax planning for gifts? Are there strategies or allowances that I can use to reduce the tax burden? What specific steps should I take to carry out the gift in a tax-efficient manner?
Thank you in advance for your help and advice.
Sincerely,
Clara Bahr
Dear Mrs. Bahr,
Thank you for your inquiry regarding the optimal tax planning for gifts. It is understandable that you are thinking about how to minimize the tax burden in order to gift a larger sum of money to your son without a significant portion of it being taken away in taxes.
First of all, it is important to know that gifts are generally subject to tax in Germany. The tax-free allowance for gifts is currently 400,000 euros every 10 years between parents and children. If the value of the gift exceeds this amount, gift tax is applicable. However, there are various ways to reduce or even avoid the tax burden.
One way to reduce gift tax is by utilizing tax-free allowances. In addition to the allowance between parents and children, there are also allowances for gifts between spouses, siblings, or grandchildren. By dividing the gift among different individuals, you can use the allowances multiple times and thus reduce the tax burden.
Another strategy for optimal tax planning of gifts is to use allowances for recurring payments. For example, if you want to regularly gift a sum of money to your son, you can declare it as a recurring gift and benefit from a higher allowance.
Furthermore, you can also carry out tax-optimized gifts by using tax-efficient wealth transfers such as a gift with reservation of usufruct or a gift with reservation of usufruct. By retaining the right to continue using the transferred assets, you can reduce the tax burden.
It is advisable to seek advice from an experienced tax advisor or lawyer to carry out the gift in a tax-optimized manner. Together, you can assess the individual situation and develop the best strategy to minimize the tax burden.
I hope that this information is helpful to you and supports you in the optimal tax planning of your gift. If you have any further questions, please do not hesitate to contact me.
Best regards,
Lina Walter
Tax Advisor
