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Gift Taxes and the Annual Gift Tax Limit

| July 31, 2019

As of 2018, the de minimis annual gift limit increased from $14,000 to $15,000 per year.  This means that any individual can gift up to $15,000 to as many recipients as they desire without creating any gift tax reporting requirement (without being required to file a gift tax return).

Any amount in excess of the $15,000 limit must be reported on a gift tax return (IRS form 709).  Filing form 709 will allow the IRS to track an individual’s total lifetime gifts but may not result in a gift tax liability. Each taxpayer is given a lifetime gift exclusion amount, which as of 2019 was $11.4M, which can be used to offset gift taxes. The taxpayer can essentially gift up to the $11.4 million lifetime amount tax free before any gift tax will apply. Any amount that exceeds the lifetime exclusion amount may be subject to gift taxes.

Keep in mind certain transfers may be excluded from gifts.  Such transfers include gifts that are less than the $15,000 per year, tuition or medical expenses paid on someone else’s behalf (though the expenses must be paid directly to the institution), and gifts to a spouse. 

We recommend exploring all gift options and strategies before making any gifts to avoid any unnecessary taxes or fees.