Gift Splitting Between Spouses refers to a provision in tax law that allows married couples to combine their annual gift tax exclusions when making gifts to a third party.
Under this provision, both spouses can treat a gift made by one spouse as if it were made one-half by each spouse. This effectively doubles the amount that can be gifted without incurring gift tax. For example, if one spouse gifts $30,000 to a child, they can elect to split the gift with their spouse, allowing them to take advantage of the $15,000 annual exclusion for each spouse. Thus, the total amount excluded from gift tax can be $30,000 without triggering any tax consequences.
Gift splitting can be particularly beneficial in estate planning, enabling couples to transfer larger amounts of wealth tax-free while staying within the IRS limits. However, both spouses must agree to split the gift, and a gift tax return (Form 709) is required to document the election for any gifts exceeding the annual exclusion amount.
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