Yes, you can transfer $100,000 to your son, but there are specific tax rules you, as the giver, need to understand and follow. While your son generally won't pay federal income tax on the gift, you may have reporting requirements and the amount could count against your lifetime gift tax exemption.
Understanding Federal Gift Tax Regulations
The U.S. federal tax system has provisions for gifts, designed to prevent individuals from avoiding estate taxes by giving away large sums of money during their lifetime.
- Annual Gift Tax Exclusion: For 2023, you can gift up to $17,000 to any individual in a calendar year without incurring any gift tax or needing to report the gift to the IRS. This is known as the annual gift tax exclusion. It applies per donor, per recipient.
- Gifts Exceeding the Annual Exclusion: When you gift an amount larger than the annual exclusion, like your proposed $100,000, you are generally required to report the gift to the IRS. This is done by filing Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return.
How a $100,000 Gift Impacts Your Taxes
Gifting $100,000 to your son will exceed the annual gift tax exclusion, triggering a reporting requirement for you.
| Type of Limit | Amount (2023) |
|---|---|
| Annual Gift Tax Exclusion | $17,000 |
| Lifetime Gift & Estate Tax Exemption | $12.92 million |
- Reporting Requirement: Since your $100,000 gift exceeds the $17,000 annual exclusion, you will need to file Form 709. The portion of your gift that exceeds the annual exclusion ($100,000 - $17,000 = $83,000) is considered a "taxable gift" for reporting purposes.
- Lifetime Exemption: This "taxable gift" amount ($83,000) will reduce your lifetime gift and estate tax exemption. For 2023, this combined exemption is a substantial $12.92 million. Most people do not give away enough money during their lifetime or have a large enough estate at death to exceed this high limit. Therefore, while you must report the gift, it's highly unlikely you will owe any actual gift tax unless you have already made significant gifts totaling close to the lifetime limit.
- No Tax for Your Son: It's important to note that, in most cases, the recipient of a gift (your son) does not pay federal income tax on the gift. The gift tax liability, if any, falls on the giver.
Practical Considerations for Gifting
- Gifting from Two Parents: If both you and your spouse (if applicable) wish to contribute, you can each utilize your annual exclusion. For example, if both parents gift to the son, they could jointly give $34,000 ($17,000 from each parent) in 2023 without any reporting. The remaining $66,000 ($100,000 - $34,000) would then be reported, reducing each parent's lifetime exemption proportionately (or one parent's, depending on how it's structured).
- Keep Records: Maintain thorough records of the gift, including the date, amount, and recipient, as well as copies of any filed tax forms.
- Consult a Tax Professional: For large financial transactions like a $100,000 gift, it is highly recommended to consult with a qualified tax advisor or financial planner. They can provide personalized advice based on your specific financial situation and ensure all IRS regulations are correctly followed.
For further information on gift taxes, you can refer to resources from the Internal Revenue Service (IRS).
