A Brief Guide to the IRS Gift Tax

IRS gift taxOne important component of estate planning is making provisions to pay any gift taxes that may be assessed by the IRS on cash or assets you transfer or bequeath to others. Since the tax burden in these situations falls on the donor rather than the donees, failure to adequately account for your liability to the government could impact your estate in unforeseen ways.

A basic understanding of how the gift tax works will help you avoid mistakes that might otherwise result in Uncle Sam taking a sizable piece of the pie. Some of the most noteworthy parts of current IRS guidelines include the following:

  • The annual gift tax exclusion allows individuals to give up to $14,000 tax-free to a single donee
  • Spouses are entitled to the same annual gift tax exclusion benefit, for a combined total of $28,000 to a single donee (called a “split gift”)
  • The annual gift tax exclusion applies to an unlimited number of donees
  • The lifetime gift tax exclusion has been indexed for inflation and stands at $5.34 million for 2014
  • Widows and widowers may claim any unused portion of the lifetime gift tax exclusion of their deceased spouse to raise the exemption to a maximum of $10.68 million
  • Transfers in excess of either the annual gift tax exclusion or the lifetime gift tax exclusion are subject to a maximum tax rate of 40%
  • Donors are generally not required to file a Form 709 (gift tax return) for transfers that fall under the annual exclusion
  • Form 709 is required for transfers or gifts that count against the lifetime exemption or for any split gifts made during the tax year

Contact a Raleigh CPA for Estate Planning

Remember, these are just general guidelines that may or may not apply to your own situation. For more personalized estate planning advice, please contact our office to set up a consultation with a tax professional.