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

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

    A federal tax applied to an individual giving anything of value ...
Related Articles
  1. Can I donate stock to charity?
    Investing

    Can I donate stock to charity?

  2. Gifting Your Retirement Assets To Charity
    Retirement

    Gifting Your Retirement Assets To Charity

  3. How An Allowance Helps Kids Get Money-Smart
    Budgeting

    How An Allowance Helps Kids Get Money-Smart

  4. Getting Started On Your Estate Plan
    Options & Futures

    Getting Started On Your Estate Plan

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center