What is the gift tax?
As defined by the Internal Revenue Service, the gift tax is one, “…on the transfer of property by one individual to another while receiving nothing, or less than full value, in return.” In general, it is said that all gifts are taxable – however, there are some exceptions to this rule. The following gifts are considered non-taxable:
-Any that are not more than the annual exclusion for the calendar year ($15,000 per gift, at the time of this writing)
-Tuition or medical expenses paid on behalf of someone else
-Gifts to one’s spouse
-Gifts to a political organization
-Gifts to charitable organizations
The recent Tax Cuts and Jobs Act of 2017 raised the annual exclusion from $14,000 to $15,000 per gift, which benefits high-net-worth individuals who wish to make gifts to their heirs.
Beware of this, however: on December 31, 2025, the exemptions will revert to lower values, absent any tax law updates in the meantime. Plan and give accordingly!