I want to give my adult daughter $13,000 as a gift. If I give
her the check on January 1, can I buy her lunch later in the month
without exceeding the annual gift-tax exemption? Can I buy her a
laptop for her birthday or a big-screen TV for Christmas?
--
A.M.,
Richmond, Va.
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Technically, all of those gifts count toward the annual limit
(which rises from $13,000 to $14,000 in 2013). But you don't need
to worry about paying for lunch.
"No one actually reports such small things, and they are
difficult to trace," says Karen Goldberg, a CPA and estate-planning
attorney with consulting firm EisnerAmper. Nor is the IRS likely to
track your gift of a laptop or TV. It can, however, track gifts of
stock or those made by check. "If an estate is audited, the IRS
typically requests the decedent's bank and brokerage statements for
the three years prior to his or her death," says Goldberg.
"Unreported gifts of stock and gifts made by check can be easily
traced this way."
Keep in mind that people may give up to the limit per person
each year to as many people as they like -- doubling the amount for
a married couple. It's highly unlikely that you'd owe tax on a
larger gift, either. For 2012, each taxpayer has a credit to cover
the gift tax on up to $5.12 million in gifts above the annual
exclusion amount. (Any part of the credit used will reduce the
amount of the credit available to offset estate taxes on transfers
after death.) If you exceed the annual limit, though, you must file
a Form 709 with the IRS to keep track of how much of the credit
you've used up.
I'd like to put a large lump sum into my 401(k) outside of my
payroll deduction to minimize the tax bite and get closer to
contributing the maximum for the year. Can I do that?
--
A.K.,
Washington, D.C.
Pretax contributions to your 401(k) must be made through payroll
deduction, so you can't add outside money to boost your tax break.
But you may still be able to increase your contributions to get
closer to the federal $17,000 maximum for 2012 ($22,500 if you're
50 or older this year).
Some employers let you contribute a year-end bonus to your
401(k) if you designate the money before the check is paid. And
most employers allow plan participants to change the amount
earmarked for their 401(k) at any time, which leaves you a small
window this year to increase your contribution.
Let your benefits manager know right away if you plan to do
this, as the change may take one to two paycheck periods to take
effect. And make sure your plan cuts off contributions when you
reach the limit.
What changes will there be to Medicare Part D and Medicare
Advantage plans in 2013, and when do I need to decide on a
plan?
--
L.T.,
Milwaukee
For Part D prescription-drug coverage, the doughnut hole (the
gap in coverage during which you must pay more out of pocket) will
narrow. In 2013, the discount on brand-name drugs you pay for in
the coverage gap will rise from 50% to 52.5%, and the federal
subsidy to help pay for generics will rise from 14% to 21%.
As for costs, the average premium for Part D will continue to be
about $30 per month. But plans continue to make other changes --
such as boosting co-payments or changing pricing tiers for your
medications -- that can result in higher out-of-pocket costs even
when the premium remains the same.
Medicare Advantage plans, which cover medical expenses and
drugs, may also change coverage and prices, and more are shrinking
their networks. Don't assume your doctors and hospitals will remain
in the plan's network in 2013.
You have from October 15 to December 7 to pick your Part D or
Medicare Advantage plan for next year. To explore your options, go
to
www.medicare.gov/find-a-plan
anytime after October 1.
This article first appeared in Kiplinger's Personal Finance
magazine. For more help with your personal finances and
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