31 Jan I have a joint account with my son. I added $35K. Is tax due?

Q. I have a joint account with my adult son. I also have a joint account with my wife. Last year I transferred $35,000 from the joint account with my wife to my joint account with my son. Three months later, it was transferred to my wife’s individual account. Are there any gift tax considerations?
— Dad

A. You’re right to wonder when, and if, the IRS pays attention to money transfers.

It does, so you need to understand how the gifting laws work.

First, the mere changing of accounts to a joint account is not a gift, said Kenneth Bagner, a certified public accountant with Sobel and Co. in Livingston. It would only be a gift if the $35,000 was withdrawn by your son, he said.

For federal purposes in 2023, you can gift $17,000 to as many people as you want without eating into your lifetime exemptions, Bagner said. A couple can give $34,000 together to a person, he said.

If you have an adult child who is married, you can gift each $34,000 as a couple, or $68,000 a year in total, Bagner said.

Now, the lifetime gift tax limit for 2023 is $12.92 million, Bagner said.

“This is if you give more than annual exclusions above,” he said. “Each spouse has this amount so it is close to $26 million in total.”

For New Jersey purposes, there is no limits on gifts, Bagner said.

“If you give over the lifetime exclusion amounts — around $26 million per couple — then there is a tax on the giver that starts at 18% and quickly moves up to 40%, which is the gift that keeps giving,” Bagner said.

Just note that when you give more than the annual exclusion, you need to file a gift tax return — Form 709 — but no tax would be due.

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This story was originally published on Jan. 31, 2023.

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