Can You Gift Your Spouse Money Tax-Free?
When both partners in a married relationship are citizens of the United States, the unlimited marital deduction enables one partner to give a total amount of money or other property to their partner while they are alive or when they pass away. However, it’s essential to note that the unlimited marital deduction does not apply to gifts made to a spouse who is not a citizen of the United States. So, can you gift your spouse money tax-free if they are not a U.S. citizen? The answer is a bit more complex.
The Unlimited Marital Deduction and Its Limitations
The reason for this limitation is that enabling tax-free transfers to a spouse who is a citizen of the United States merely delays the payment of taxes that are owed on the assets. The remaining assets will be liable for taxation upon the passing of the surviving spouse. However, suppose the surviving spouse is not a citizen of the United States. In that case, it is possible for those assets to evade taxation, making it a crucial consideration in your financial planning.
Gift Tax Exclusions for Non-Citizen Spouses in 2023
When determining the total amount of taxable gifts for 2023, the first $175,000 of gifts given to a spouse who is not a citizen are excluded from taxation. This represents an increase of $11,000 from the previous limit in 2022. So, while it’s not entirely tax-free, there are specific exemptions and limits in place to help minimize the tax burden when gifting money or property to a non-citizen spouse. Understanding these rules and consulting with a tax professional can ensure that you make informed decisions regarding your financial gifts within the bounds of tax law.
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