He's trying to get around the limit, but are there consequences to our taxes? We also have children. I understand there is a lifetime limit. Would ours be affected? He also wants his spouse to gift us $14000 for a total of $56,000/ year
That is called a tax avoidance scheme that I would steer clear of if I were you ... however, they can give more than the max $14K if they want they would just need to file a gift tax return even if they would not owe any gift tax.
Or if they were smart they would give $14K to each this tax year and come Jan 1 they can do it again and the max increases to $15K in 2018.
"Gift Tax" is somewhat of a misnomer. Even though a gift tax return may be required, very few people ever actually pay federal gift tax. The purpose of the gift tax return is usually only to document a reduction in the allowable estate tax exemption.
You will have to file a gift tax return to report the gifts, but you will not actually have to pay any gift tax unless you have made gifts totaling over $5.45 million over your lifetime.
A gift tax return is separate from income tax. It does not go on her income tax return. TurboTax cannot be used to prepare a gift tax return.
That is called a tax avoidance scheme that I would steer clear of if I were you ... however, they can give more than the max $14K if they want they would just need to file a gift tax return even if they would not owe any gift tax.
Or if they were smart they would give $14K to each this tax year and come Jan 1 they can do it again and the max increases to $15K in 2018.
"Gift Tax" is somewhat of a misnomer. Even though a gift tax return may be required, very few people ever actually pay federal gift tax. The purpose of the gift tax return is usually only to document a reduction in the allowable estate tax exemption.
You will have to file a gift tax return to report the gifts, but you will not actually have to pay any gift tax unless you have made gifts totaling over $5.45 million over your lifetime.
A gift tax return is separate from income tax. It does not go on her income tax return. TurboTax cannot be used to prepare a gift tax return.
I agree with Critter, don't get involved with something that is trying to fraudulently hide something. Your in-law is not really Gifting you $14,000 each, he is effectively Gifting that amount to his children. So it would still need to be reported on his Gift Tax return.
When the Estate Tax is eliminated, this all becomes moot. Meanwhile the middle class, like you and me, gets the shaft with this plan.