Gift Splitting

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.

BREAKING DOWN '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 Tax Return

    A federal tax form that must be filled out by any individual ...
  2. Gift

    Property, money or assets that one person transfers to another ...
  3. Gift Tax

    A federal tax applied to an individual giving anything of value ...
  4. Gift In Trust

    An indirect bequest of assets to a beneficiary by means of a ...
  5. Annual Exclusion

    The amount of money that may be transferred by gift from one ...
  6. Gift Card

    Gift cards fill the role that paper gift certificates used to ...
Related Articles
  1. Financial Advisor

    How to Gift Your Way to Lower Estate Taxes

    Estate planning is not just for inheritance. High net-worth individuals, who plan properly, can gift their money and save on taxes.
  2. Personal Finance

    How to Talk to Your Family About Christmas Gift Budgets

    Talking Christmas gift budgets with family members can be hard, but having the talk will help you stay on track financially.
  3. Investing

    Top Websites For Discounted Gift Cards

    Gift cards can cost less when you buy them through a discount website. Just do the math before you cough up the cash.
  4. Investing

    How Safe Are Discounted Gift Card Websites?

    Could you buy a gift card online and find out it's worthless? Here's how to protect yourself (and whether you need to).
  5. Personal Finance

    7 Sources Of Nontaxable Income

    All income in the United States is taxable, unless a provision specifically excludes it. Here are seven of those exceptions.
  6. Financial Advisor

    Surprise! These Items are Taxable

    These are 10 surprising taxable items you need to be aware of if you don't want the IRS knocking on your door.
  7. Financial Advisor

    A Quick Guide to High-Net-Worth Estate Planning

    A quick estate planning guide for high-net-worth individuals to help minimize taxes and costs, protect assets and plan for care.
  8. Retirement

    Choosing The Best Charitable Gift Annuity

    Want to support a cause you care about, but still earn income from that donation in your retirement years? This vehicle offers both.
  9. Personal Finance

    8 Tips To Help You Control Holiday Spending

    These tips will have you singing "Joy to the World" well into the New Year.
  10. Personal Finance

    Tips For Avoiding A Holiday Spending Hangover

    You don't have to go into debt to have a happy and memorable holiday season. Use these tips for a bountiful Yuletide on a Scrooge-like budget.
RELATED FAQS
  1. How does the gifting process work with a deed transfer?

    My parents own a home that they would like to "gift" to my husband and me. The house is in my parents name and ... Read Answer >>
  2. If a parent transferred a house deed to their three adult children, do they need ...

    Currently, only the parents Read Answer >>
  3. How can my husband inherit a house deed?

    My mother in law wants to know the best way to leave the deed to her house to her son (my husband). Should it be left in ... Read Answer >>
  4. Justin and Britney, multi-millionaires, want to make the maximum gift of cash to ...

    The correct answer is c. A donor of money and/or gifts may give up to $12,000 to as many different recipients as they desire ... Read Answer >>
  5. Who will pay taxes on my grandmother's home?

    I don't own a home, but I have the power of attorney for my grandmother who will be going into a nursing home. I've ... Read Answer >>
  6. How should I report my quitclaim deed?

    I live in Louisiana. My daughter and the rest of my family live in New Jersey. Two years ago, they didn't have enough ... Read Answer >>
Hot Definitions
  1. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  3. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  4. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  5. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  6. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
Trading Center