Gift Splitting

AAA

DEFINITION of 'Gift Splitting'

A taxation rule that allows a married couple to split a gift's total value as if each contributed half of the amount. Gift splitting allows a couple to increase their total gift tax exemption amount by combining individual allowances.

INVESTOPEDIA EXPLAINS 'Gift Splitting'

For gift splitting to be official, both spouses must agree to the gift and specify the situation when filing taxes. In 2011, the gift tax exemption was set at $13,000 per individual gift annually. Gift splitting allows a couple to donate a total of $26,000 before being taxed on the contribution.


For example, let's say you want to give your child $20,000 to purchase a vehicle. If you make the gift alone, $7,000 ($20,000-$13,000) will be subject to gift taxes. However, if you split the gift with your spouse, with each of you contributing $10,000, both contributions will fall under the $13,000 limit, making the entire gift non-taxable.


RELATED TERMS
  1. Gift Letter

    Written correspondence to a lender stating that money received ...
  2. Gift Tax Return

    A federal tax form that must be filled out by any individual ...
  3. Crown Loan

    A loan with no set maturity date, These loans are typically made ...
  4. Annual Exclusion

    The amount of money that may be transferred by gift from one ...
  5. Gift Tax

    A federal tax applied to an individual giving anything of value ...
  6. Gift

    Property, money or assets that one person transfers to another ...
RELATED FAQS
  1. Can I donate stock to charity?

    Giving stock, instead of cash, as a donation can greatly benefit both parties. You will find that most charities, hospitals, ... Read Full Answer >>
  2. Can I give stock as a gift?

    Stocks, bonds or any other securities can be transferred as gifts. Giving the gift of stock also has benefits for the giver. ... Read Full Answer >>
  3. What does U.S. law say about contingent beneficiaries?

    In the United States, posthumous asset transfers only require the listing of a primary beneficiary. Contingent beneficiaries ... Read Full Answer >>
  4. How do I change my contingent beneficiary?

    Keeping your beneficiary designations up to date is an important aspect of comprehensive estate planning. Listing a primary ... Read Full Answer >>
  5. What kinds of assets can be included in a revocable trust?

    A revocable trust is an important part of estate planning. The trust document allows a living grantor to receive income from ... Read Full Answer >>
  6. How do you set up a revocable trust?

    A revocable living trust (RLT) is an arrangement in which a grantor transfers ownership of property through a trust. The ... Read Full Answer >>
Related Articles
  1. Retirement

    Gifting Your Retirement Assets To Charity

    There are several things to consider when it comes to this type of charitable giving. Make sure you're well informed.
  2. Budgeting

    How An Allowance Helps Kids Get Money-Smart

    Discover which of these three reward techniques teaches the best lessons about money.
  3. Options & Futures

    Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  4. Economics

    What is a Fiduciary?

    A fiduciary is a person who acts on behalf of another person (or people) to manage assets.
  5. Retirement

    Retirement: The Journey Of 1000 Miles

    Substantial time should be set aside to fully outline one's vision for retirement and the specific steps that must be taken to realize it.
  6. Professionals

    Tips for Spreading the Wealth to Relatives

    There are many ways that your clients can move money or other assets to relatives in order to reduce their tax bills. Here's a primer on best practices.
  7. Professionals

    Tips for Handling Client Inheritance

    When clients leave or receive an inheritance, be prepared to deal with much more than mere paperwork or financial transactions.
  8. Professionals

    Advice on Dealing with Unequal Inheritances

    When it comes to inheritances, the concept of equal versus equitable can be hard to navigate, even when all parties are reasonable.
  9. Professionals

    Top Tips for Family Wealth Transfers

    Essential tips for tackling family wealth transfers.
  10. Professionals

    Estate Planning Tips for Financial Advisors

    Estate planning is not a set-it-and-forget-it proposition. Here are some tips for you and your clients.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center