How can I minimize gift tax?
February 17, 2022 | 50,00 EUR | answered by Bernd Schreiber
Dear tax advisor,
my name is Jessica Kaiser and I have a question regarding gift tax. My father wants to give me a larger sum of money to help me financially. However, I am concerned that this could result in high gift taxes for me. I would like to know how I can minimize the gift tax in order to not have to give a large portion of the gifted money back to the state.
Currently, I am not married and do not have children. I work a full-time job and earn an average income. My father is retired and has savings that he would like to distribute among his children. He wants to give me a larger amount so that I can improve my financial situation. However, I am worried about the potential taxes that could arise from this gift.
Therefore, I would like to know from you what options there are to minimize the gift tax. Are there specific tax exemptions that I can take advantage of? What tax regulations should I consider in order to keep the gift tax as low as possible? Are there perhaps other ways to reduce the tax burden?
I would greatly appreciate it if you could provide me with specific tips and recommendations on how I can minimize the gift tax when receiving money from my father. Thank you in advance for your help.
Sincerely,
Jessica Kaiser
Dear Mrs. Kaiser,
Thank you for your inquiry regarding gift tax. It is understandable that you are concerned about possible taxes on a monetary gift from your father. I would be happy to provide you with some information and tips on how to minimize gift tax.
Firstly, it is important to know that in Germany, there are tax-free allowances for gifts up to a certain amount. These allowances apply to gifts between parents and children, as well as gifts between spouses. Currently, the tax-free allowance between parents and children is 400,000 euros every 10 years. This means that you can receive money from your father tax-free up to this amount. If the amount your father wishes to gift you is below this allowance, you do not have to pay gift tax.
Another important point is that gifts within the family are taxed at a lower rate than gifts to third parties. Therefore, it may make sense for your father to gift you the money rather than leaving it as an inheritance. This can help minimize the tax burden.
Your father also has the option to spread the gift over a longer period of time to make optimal use of the tax-free allowance. For example, smaller amounts could be gifted to you in various years to avoid gift tax.
Furthermore, certain arrangements in the gift can help reduce the tax burden. For instance, your father could gift you the money under specific conditions, such as a loan without interest. In this case, the gift could be treated differently for tax purposes.
It is advisable to seek advice from a professional tax advisor in such a situation to find the optimal solution. A tax advisor can tailor advice to your specific situation and suggest further ways to minimize gift tax.
I hope this information is helpful to you, and I am available to answer any further questions you may have. I wish you success in your financial planning and hope you can successfully minimize gift tax.
Best regards,
Bernd Schreiber
