It goes without saying that the laws governing the U.S. estate and gift tax system are complex and the taxes and penalties for mistakes are high. For a foreign citizen the U.S. estate and gift tax system requires a much higher degree of awareness. Several changes to the gift tax laws have been made for 2016 that taxpayers giving cash gifts will need to take into account. The laws regarding to the exchange of cash gifts between U.S. citizens and foreign citizens and companies are becoming increasingly strict.
Gifts between U.S. and Foreign Citizens
The annual exemption amount for gifts between foreign citizens and U.S. citizens in 2016 is $14,000. Any gift that is beyond the $14,000 annual exemption amount, requires both the U.S. and foreign citizens to file a gift tax return so that the exceeding amount can be reported. A benefit of the gift tax exemption is that in addition to the annual exemption amount, there is also a lifetime exemption that applies. For 2016, the lifetime exemption threshold will be $5.45 million, so a sizable amount is required for gift tax liability.
There is yet another benefit for married couples where one spouse is a U.S. citizen and the other is a foreign citizen. For 2016 if the gift is given to a spouse, there is an unlimited marital deduction of $148,000. Any gift between a U.S citizen and their foreign citizen spouse that exceeds that unlimited marital deduction can still use the lifetime exemption amount of $5.45 million before the taxpayers must file gift tax returns.
Gifts from Foreign Citizens or Companies
You’ve heard the saying, “it’s better to give than receive”, well the IRS is proving that may not always be the case. When a U.S citizen receives a gift from a foreign citizen or company the limitation amounts change. In 2016, taxpayers are still not subject to gift taxes on all gifts received, but they are required to report it on IRS Form 3520 if the gift is from a foreign citizen and in excess of $100,000. Gifts from an overseas corporation or partnership are subject to lower threshold limits because the gift values are adjusted for inflation every year. Next year, this limit will be $15,671.
About Oakstone Law, PL
Oakstone Law PL was founded by Bob Kleinknecht. A member of the Florida Family Trust Company Subcommittee, the Estate Tax & Trust Planning (ETTP) Committee and the Real Property, Probate & Trust Law (RPPTL) Section of the Florida Bar, Kleinknecht has 15 years’ experience.
Prior to founding Oakstone law, he spent more than eight years serving as a personal, in-house estate, tax and charitable planning attorney for a Forbes 400 family in New York and Florida. Before that he was an estate planning and estate settlement attorney with prominent firms in Boston and Washington, D.C. after beginning his career with a boutique firm in Naples, Florida.
Licensed in Florida and Massachusetts, Kleinknecht has developed a practice model that eliminates billing by the hour and offers a streamlined, customized client process supported by technology, security and a personal approach.