The IRS publication 950 explains the annual gift tax exclusion. A gift tax applies to property which includes money that you give to another without expectation of receiving anything in return. The IRS clearly states that any gift is a taxable gift. Yet there are exceptions as defined by the IRS and an exclusion amount is offered each year to the giver of the gift and can be deducted from income
. received during that year. The annual gift tax exclusion amount is adjusted approximately every three years for cost of living increases. For example, in 2008 you can give a gift valued at up to $12,000 each to any number of people and the recipients will not have to pay taxes showing it as income, yet you as a tax payer can deduct these valuable gifts from your overall income received during that year. The example as seen on the IRS website is: In 2008, you give your niece a cash gift of $8,000. It is your only gift to her this year. The gift is not a taxable gift because it is not more than the $12,000 annual exclusion. For more information please visit this web site http://www.irs.gov/publications/p950/ar02.html
