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The gift tax limit is set in two ways. First, it allows annual exemptions for giving. It also includes a lifetime layer that sets the total amount of overage allowed before the gift tax automatically kicks in on any gifts. Exceeding the limits results in tax liability.
The Annual Limits
The gift tax limit (in 2011) is $13,000 per recipient. This means a single giver can actually give hundreds of people $13,000 each without incurring the gift tax. The recipients also will not be subject to income tax on the money given.
The rules for couples are a little different. They can pool their annual exemptions to give larger amounts to recipients each year.
The Lifetime Limits
The gift tax does set a lifetime limit on overage, as well. Givers who consistently go over the $13,000 limit will have the excess amount charged against a $1 million lifetime pool. Once this pool is filled, the gift tax automatically kicks in.
Avoiding the Gift Tax
It is possible to avoid the gift tax by staying within the limits in annual gifts to individual recipients. Exemptions can also be capitalized on. They include payments for medical expenses, charitable donations and payments of educational fees on behalf of others.
The Annual Limits
The gift tax limit (in 2011) is $13,000 per recipient. This means a single giver can actually give hundreds of people $13,000 each without incurring the gift tax. The recipients also will not be subject to income tax on the money given.
The rules for couples are a little different. They can pool their annual exemptions to give larger amounts to recipients each year.
The Lifetime Limits
The gift tax does set a lifetime limit on overage, as well. Givers who consistently go over the $13,000 limit will have the excess amount charged against a $1 million lifetime pool. Once this pool is filled, the gift tax automatically kicks in.
Avoiding the Gift Tax
It is possible to avoid the gift tax by staying within the limits in annual gifts to individual recipients. Exemptions can also be capitalized on. They include payments for medical expenses, charitable donations and payments of educational fees on behalf of others.
