What are the tax benefits of making a gift?
April 15, 2022 | 50,00 EUR | answered by Bernd Schreiber
Dear tax advisor,
My name is Otto Netz and I am faced with the situation of gifting a larger sum of money to my grandson. However, I am unsure about the tax benefits associated with a gift and how I can best utilize them.
The reason behind this is that I would like to financially support my grandson and provide him with a good future. However, I also want to keep an eye on the tax implications and save taxes as much as possible.
Currently, I am unsure if I can claim the gift for tax purposes and what tax exemptions are available to me. Additionally, I am concerned that I may have to pay taxes that could have been avoided with the right tax planning.
Therefore, I would like to know from you what specific tax benefits are associated with a gift and how I can best utilize them. Are there specific exemptions I should consider? What tax aspects are particularly relevant when it comes to a gift?
I would greatly appreciate it if you could provide me with your expertise in this area and give me tips on how to best utilize the tax benefits of a gift.
Thank you in advance for your help.
Sincerely,
Otto Netz
Dear Mr. Netz,
Thank you for your inquiry regarding gift tax and your intention to gift a larger sum of money to your grandchild. It is commendable that you are considering the tax implications and trying to optimize tax benefits to provide financial support to your grandchild.
Gifts involve the transfer of assets, which generally incur gift tax. However, there are exemptions that you can utilize to achieve tax advantages. In Germany, the following exemptions apply:
- For children, the exemption amount is 400,000 euros every 10 years
- For grandchildren, the exemption amount is 200,000 euros every 10 years
- For great-grandchildren, the exemption amount is 100,000 euros every 10 years
It is important to consider these exemptions as gifts up to these amounts are tax-free. Taxes must be paid on the exceeding amount. If you intend to gift a larger sum of money to your grandchild, make sure not to exceed the 200,000 euro exemption to save on taxes.
Furthermore, gifts can be claimed for tax purposes under certain conditions. Gifts can be considered as an advance inheritance, allowing the exemption amount to be used again every 10 years. This can be beneficial for larger estates to reduce the tax burden.
It is advisable to seek advice from a tax advisor to optimize the tax aspects of a gift. A tax advisor can help you calculate the exemptions, avoid tax pitfalls, and maximize potential tax benefits.
I hope this information is helpful to you and that you can make the most of the tax advantages of gifting to provide financial support to your grandchild.
Sincerely,
Bernd Schreiber
