If you have children, grandchildren or other loved ones, you can support them financially. And if your contribution remains within limits, you do not have to pay tax on it. But what exactly is and is not allowed with such a tax-free donation?
Tax-free donation to your child
If you donate money to someone else, the recipient pays gift tax. Unless the donation amount is lower than a certain limit, in which case it is a tax-free donation. If you have children, you can donate a maximum of EUR 6,035 tax-free per child in 2023. This also applies to foster children or stepchildren. If you are divorced from the father or mother of your children, you will still count as one donor. Suppose you live together and/or do not yet have a registered partnership, then additional conditions apply.
Tax-free donation to someone else
If you make a donation to someone who is not your child, the tax-free amount is a maximum of 2,418 euros. The recipient could be your grandchild, your brother or sister, your nephew or niece, or even someone outside your family. The recipient of the tax-free donation may spend the amount at his or her own discretion. The person may receive several donations per year, but does not have to pay tax if the total amount is less than 2,418 euros.
One-off increased exemption: purchase of house or free expenditure
You may donate a higher amount tax-free to your child or another loved one a maximum of once in your life. This one-off increased exemption allows you to help someone else, for example to buy a house or make another large investment. There are certain conditions attached to this. For example, the recipient – or his partner – must be between 18 and 40 years old. In 2023, the maximum tax-free donation for your child is 28,947 euros. You can help someone who is not your child with a tax-free donation of 28,947 euros. But in 2023, this is only possible if the person spends the amount on their own home
Also read: My child is on welfare. Can I give him money?
One-off increased exemption: expensive study
If your child is following an expensive course of study (at least 20,000 euros per year), you can donate 60,9298 euros once to help him or her. But be aware that you can only make such an extra large donation once in your life. Such a one-off donation plus a regular tax-free donation in the same year is not permitted. So make sure you are well informed of the exact conditions.
Material donation
What if you don’t donate money, but for example a house or a car? Suppose you give your child a car that is worth 10,000 euros. He or she will then receive an exemption for the first 6,035 euros. But there is a gift tax on the remaining 3,965 euros. You can also use the one-off increased exemption, but then you lose this right for the rest of your life. Donating a home is a lot more complex. The amount exempted depends on the WOZ value of a home. You can also transfer a family business to your child, in combination with an exemption of more than 1 million euros. The Tax Authorities explain exactly what this business succession scheme entails.
What will change in 2024?
The maximum amounts for a tax-free donation apply for an entire calendar year. It is not yet known at the time of writing how high these amounts will be as of January 1, 2024. What is certain is that the jubilee scheme (a form of one-off increased exemption) will be completely canceled in 2024. Making a large tax-free donation to help someone purchase a home is no longer possible.
(Source: Archive, MAX Magazine, National Government, Brabants Dagblad, Tax Authorities, Van Lanschot Kempen, Familiebank. Photo: Shutterstock)