Estate Planning

Questions About Estate Tax

How Much Money Can I Give Without Paying Gift Tax?

by Rania Combs

Under our country’s tax laws, it is the person making a gift (the donor) who is responsible for any federal gift tax that is due. The gift’s recipient (the donee) is not required to pay any income taxes on the value of the gift received.

The annual gift tax exclusion, the maximum amount a donor can give a donee in a single year without filing a federal gift tax return, increased to $15,000 a year in 2018.

In addition to the annual gift tax exclusion, Americans can also make lifetime gifts of up to the federal estate tax exemption ($11.2 million this year); however, the gifted amount is deducted from the amount that can be transferred at death without any federal estate tax liability.

So for example, if an American has already given away $8 million during his life, and dies dies this year, he would have an additional $3.2 million that can be transferred at death before owing any federal estate taxes.

The law has a sunset provision, which means that if Congress does not pass any additional legislation, the exemption amount will revert to the $5 million exemption (indexed for inflation) in 2026.

Until then, the new law make it possible to for the very wealthy to transfer a lot of money to their heirs without incurring any federal taxes.


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