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How Much Can I Give Away Without Filing a Gift Tax Return?

how much is the gift tax

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Most gifts are not large enough to qualify for the federal gift tax, which taxes gifts at the same rate as income. The IRS allows for an annual exclusion that enables you to give a maximum amount of money each year to an individual without triggering a gift tax. In addition, you have the option of using a lifetime exemption on gifts to prevent a tax charge.

Annual Exclusion

The IRS sets an annual exclusion each year, making occasional adjustments based on changes in inflation. In 2012, the annual exclusion was set at $13,000, which was the number first established in 2009. You can give $13,000 to as many individuals as you like without worrying about gift tax.

Federal Unified Credit

If you give someone a gift greater than the annual exclusion, you can still avoid

gift tax by using your so-called unified credit, which is $5.12 million at the time of publication. The amount of the unified credit is always the same as the amount a person's estate can shelter from estate tax. If you give large gifts during your lifetime and choose not to pay gift tax, this amount decreases the amount your estate can shelter from estate tax later. For example, if you give $2 million in gifts during your lifetime and choose not to pay gift tax, only $3.12 million of your estate is protected from estate tax when you die. The unified credit applies to all gifts above the annual exclusion. For example, suppose you gave gifts of $15,000 to two people. The sum of the amounts above $13,000, or $4,000 total, would count against the unified credit.

Non-Cash Gifts, Bargains and Loans

Category: Taxes

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