What Is the Annual Gift Tax Exclusion? www.davidovlaw.com
There are taxes on transfers of assets in the United States. One of them is the federal estate tax. To prevent people from giving away assets while they are living to avoid the estate tax, there is also a federal gift tax in place.
The reason why you are not taxed when you give someone a relatively modest birthday gift is because there is an annual gift tax exclusion. Most people will never pay the gift tax because of this exclusion. The exact amount of the annual gift tax exclusion is periodically adjusted to account for inflation, and even the base is always subject to change via legislative mandate. This being stated, in 2014 the amount of the annual gift tax exclusion is $14,000. You can give gifts totaling as much as $14,000 per person to any number of gift recipients per year tax-free. The total can equal any amount of money. For example, let's say that you have a big family. You have 10 children, and they are all married. You are married as well, and your spouse is alive. You have a $14,000 per person annual exclusion to utilize, and your spouse has his or her own exclusion. As a couple, you could give $28,000 to any number of individuals in a given calendar year free of taxation. So you have 10 married children. You and your spouse could give each couple a total of $56,000: $28,000 to the wife, and $28,000 to the husband. If you