The gift tax is a federal tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.
In 2020, the annual gift tax exemption is $15,000. Therefore, an individual can gift to another individual up to $15,000 this year without having to file any forms with the Internal Revenue Service. This amount is adjusted each year based on inflation.
In 2021, the lifetime gift exclusion, which is tied directly to the estate tax gift exclusion is $11,700,000. This means that an individual can either gift $11,700,000 during his or her lifetime without being assessed any tax, exclude $11,700,000 of his or her estate from estate tax at death, or any combination of the two, so long as the value does not exceed $11,700,000 in 2021. This amount is also adjusted annually for inflation and set to expire in 2026 if Congress does not pass legislation addressing this issue.
Contact an Estate Planning Attorney
Gifting can be a great strategy to decrease your estate over time. However, prior to making large gifts, it is advisable to consult with a professional estate planning and gifts attorney to ensure that everything is done properly and on time. Contact us today.