Can I avoid gift tax if I regularly give money to my child?
March 22, 2022 | 50,00 EUR | answered by Lina Walter
Dear tax advisor,
My name is Quentin Tiefental and I have a question regarding gift tax. In the past few years, I have regularly gifted money to my child to financially support them. Now I am worried that I may have to pay gift tax.
My current situation is as follows: I have gifted a total of 50,000 euros to my child in the last three years, 10,000 euros each year. I would like to continue gifting money regularly to help my child, but I also want to avoid having to pay gift tax.
My concerns are that the tax authorities may become aware and demand gift tax from me. I would like to know if there are ways to avoid gift tax if I want to continue gifting money to my child regularly.
Therefore, my question is: Are there legal ways to avoid gift tax when I regularly gift money to my child? I am willing to be informed about possible tax measures and take appropriate steps to ensure that I do not have to pay gift tax.
Thank you in advance for your support and advice.
Sincerely,
Quentin Tiefental
Dear Mr. Tiefental,
Thank you for your inquiry regarding gift tax. I understand your concerns about possible tax payments and would like to provide you with some information and tips on how to avoid gift tax.
First of all, it is important to know that in Germany, gift tax is due when you give more than 20,000 euros to a person within a period of ten years. The tax-free allowance is 20,000 euros, which means that you can give gifts up to this amount without incurring gift tax. In your case, you have given your child a total of 50,000 euros in the last three years, which means that gift tax is due for the amount over 20,000 euros.
To avoid or at least reduce gift tax, there are various legal options. One option would be to spread the gifts into smaller amounts to stay below the 20,000 euro allowance. For example, you could give 5,000 euros annually instead of 10,000 euros to avoid gift tax.
Another option would be to not gift the money directly to your child, but instead to your spouse or other relatives who have a higher tax-free allowance. This way, you could avoid gift tax, as each recipient has their own allowance.
Furthermore, you could consider gifting your money in the form of assets, as these may be tax-favored under certain circumstances.
It is important to note that tax authorities carefully examine whether gifts are indeed considered as gifts or if they might be considered as hidden gifts, which are still subject to gift tax. Therefore, it is advisable to seek advice from a tax advisor to avoid legal issues.
I hope this information helps you and that you can cleverly avoid gift tax in the future. If you have any further questions or would like a detailed consultation, I am at your disposal.
Best regards,
Lina Walter
