It is often a common question when deciding various estate planning techniques as to how much I can gift to a loved one, family member, or friend, and what the gift tax liability might be. To be clear, the liability for the gift tax rests with the one who is donating the gift (the “donor”). However, there are certain amounts which are set by the IRS which will not result in gift tax liability for the donor.
For those who are gifting in 2014, the annual exclusion for an individual is $14,000.00. This means that the individual donor may gift up to $14,000.00 in the 2014 tax year to as many individuals as they wish and not have to incur any gift tax. For reference, the gift tax form is IRS Form 709. For married couples, they may give a combined amount of $28,000.00 in tax year 2014 to as many different individuals and not incur any gift tax liability.
In addition, it is important to note that gifts made in excess of the annual exclusion may be tax free up to a lifetime exemption amount, which for 2014 is $5,340,000.00. If you exceed this lifetime amount, you may have up to 40% gift tax exposure. This is the same amount for both estate and gift tax, and it is referred to as the unified credit. In other words, if you gift in excess of the annual exclusion amount, this overage will be counted against the lifetime exemption for both gift and estate tax consequences.
If you have further questions of gift taxes or estate planning in general, please contact the Law Offices of Michael W. Alpert at: (631) 225-4603 or contact us today.