What happens if I exceed the tax-free allowance for gifts?
September 27, 2023 | 50,00 EUR | answered by Bernd Schreiber
Dear tax advisor,
My name is Siegfried Raab and I am facing an important decision regarding a gift, about which I would like to have more information. My father wants to give me a large sum of money that would exceed the gift tax exemption. Therefore, I am wondering what would happen if I exceed the gift tax exemption and what the tax consequences could be for me.
In the current situation: My father wants to gift me a sum of 200,000 euros. However, the gift tax exemption for gifts between parents and children is only 100,000 euros every 10 years. Therefore, I would exceed the exemption by 100,000 euros.
I am concerned that I may have to pay high gift taxes due to exceeding the exemption, which I may not be able to afford. Therefore, it is very important for me to know what tax consequences I may face and if there are ways to avoid or minimize them.
Therefore, my question is: What happens if I exceed the gift tax exemption and how can I possibly reduce the tax burden? Are there legal ways to avoid or minimize gift tax? I would be very grateful if you could help me and show me possible solutions.
Thank you in advance for your support.
Kind regards,
Siegfried Raab
Dear Mr. Raab,
Thank you for your inquiry regarding gift tax. It is understandable that you are concerned about the tax consequences that may arise if you exceed the gift tax exemption. I will explain in detail what happens if you exceed the exemption and what options are available to reduce the tax burden.
If you exceed the gift tax exemption of 100,000 euros, you will have to pay gift tax on the amount exceeding that limit. There are different tax brackets with varying tax rates for gifts between parents and children. The exact tax rate depends on the relationship between the donor and the recipient, as well as the amount of the gift. In your case, with a gift of 200,000 euros, the tax rate would be 15%.
There are several ways to reduce the tax burden. One option is to split the gift and spread it out over several years. This way, you can make optimal use of the 100,000 euro exemption every 10 years and reduce the tax burden. Another option is to utilize the exemptions of other family members to minimize the tax liability.
There are also legal ways to avoid or minimize gift tax. One option is to declare the gift as an advance on the inheritance, which could result in more favorable tax treatment. Additionally, you can carry out tax-optimized gifts by giving assets such as real estate or securities instead of cash.
It is important to seek professional advice beforehand to find the best solution for your individual situation. An experienced tax advisor can help you understand the tax consequences and take appropriate measures to minimize the tax burden.
I hope this information was helpful. If you have any further questions or would like personalized advice, please feel free to contact me.
Sincerely,
Bernd Schreiber
Tax Advisor
