Children’s birthdays weren’t celebrated until the 1800s — before that, birthdays were adults-only! The parties we throw for our kids today would look very strange to a European family from the Renaissance. Back then, adults celebrated their birthdays, but kids typically didn’t. According to Princeton University’s Cotsen Children’s Library, children’s birthdays were marked by a “traditional Christian practice of reflecting on one’s life and choosing goals for the coming year” — not cake, candles, and presents. Psychology Today reports that the switch happened in the 1800s when parents in Germany started celebrating their children with gatherings of friends and family. They even whipped up birthday cakes — with one twist. According to Reader’s Digest, Germans set out their candlelit cakes in the morning, but the birthday boy or girl had to wait until after dinner to make their wish and take a bite. The Germans created a new word for these events: kinderfeste or “children’s parties.” The practice was controversial at first, but eventually, it caught on. If you grew up with big birthday bashes, you might want to thank those festive Germans! Did You Know?
Demystifying Gift Tax Exemptions
Is Giving Big a Smart Move for You?
Are you planning a generous gift to a loved one for their birthday or graduation this year? If so, you should be aware of both the annual gift tax exemption and lifetime estate/gift tax exemption. These numbers play off each other, and misunderstanding even one of them can trip up your estate planning. UNDERSTANDING ANNUAL AND LIFETIME EXEMPTIONS The annual gift tax exemption is an amount applied per recipient ($17,000 per recipient in 2023). Essentially, you are exempt from reporting gifts up to the annual exemption for each person you gift to. If you exceed the annual exemption for one individual, you can still gift below $17,000 to another individual. Exceeding the annual exemption does not incur immediate taxes but instead lowers the amount of your lifetime estate/gift tax exemption. The lifetime exemption ($12.92 million per individual in 2023) applies to your estate. This number represents the total value of your estate that will be exempt from federal estate taxes. When an individual dies, the exemption for that year applies to the estate. The transfer of an estate valued below this number will not be taxed. ANNUAL AND LIFETIME EXEMPTIONS CONTINUE TO RISE On Jan. 1, 2023, both the annual exemption and the lifetime exemption went up. The annual exemption amount per recipient is now $17,000 — up from $16,000 in 2022. The lifetime exemption reached $12.92 million per individual — up from $12.06 million in 2022. Married couples have a $25.84 million lifetime exemption compared to $24.12 million last year. The lifetime exemptions will likely continue to rise until 2026. CALCULATING GIFT TAXES Imagine you give a $40,000 car to an individual. You will exceed the annual exemption by $23,000. This amount must be reported to the IRS and will then be deducted from your lifetime exemption of $12.92 million — leaving a $12.69 million lifetime exemption remaining. If a married couple makes the $40,000 car donation together, the couple splits the $23,000 excess. Complicated tax laws like these can confuse even the most experienced entrepreneurs. If you plan to give generously in 2023, contact our team for assistance with maximizing your gifting abilities and protecting what you’ve worked hard to build.
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