Gift Splitting

Gift Splitting is a tax strategy that allows married couples to combine their individual gift tax exclusions when making gifts to a third party.

For instance, in the United States, each individual has an annual gift tax exclusion limit (e.g., $17,000 for 2023). Under the gift splitting provision, a married couple can elect to treat a gift made by one spouse to a recipient as if it were made equally by both spouses. This means they can effectively double the exclusion limit. If one spouse gifts $34,000 to their child, they can elect to split the gift, allowing the couple to avoid gift tax on the entire amount, as it falls within the combined exclusion limit of $34,000.

It is important to note that both spouses must consent to gift splitting, and it is only applicable to gifts that are not subject to any other tax or restrictions.