The Gift Tax Takes All the Fun Out of Giving

If you are planning on giving assets to another individual, the gift tax might come into play. The gift tax can significantly limit the amount of money or asset that you can give someone without paying taxes on the transfer. Here are the basics of the gift tax and how it works.

The Gift Tax

As the donor, you will be responsible for paying the gift tax after a transfer of ownership has been made. You may be required to pay this tax if you give someone money, securities, or physical assets.

Limits

Every year, you will have a maximum amount of money that you can give someone. Currently, you are able to give a gift of $13,000 or less without incurring any taxable liability. If the value of the gift is more than this amount, you will have to pay taxes on the overage.

Exemptions

There are some exceptions to this rule that the gift tax does not apply to. One common gift that would not require taxes is when an individual pays for tuition for someone else. If you are making direct payments to the educational institution, you will not have to pay taxes. This exemption also applies if you are making medical payments for someone else.

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