The Internal Revenue Service sets the lifetime gift tax exemption amounts, and taxpayers report this data on Form 709, notes the Internal Revenue Service. In addition to the lifetime gift tax amount, there is an annual gift tax exclusion, reports Forbes.
A gift is a transfer of property by one individual to another while receiving nothing, or less than full value, in return. The gift tax exemption and exclusion figures allow taxpayers to send money through their estate to friends or family members, explains Forbes. Different circumstances, such as filing status, also impact the gift amount subject to the gift tax exemption and exclusion. The IRS website lists all of the relevant forms and publications needed to apply for the gift tax exemptions and exclusions.
In most instances, it is the giver and not the recipient who pays the gift tax, mentions TurboTax. Even though taxpayers do not have to pay any taxes on gifted amounts, it is still necessary to file information forms. Moreover, gift taxes relate to estate taxes in that each gift reduces a taxable estate. Further complications arise when gifting contributions to a 529 college savings plan for a future student. In addition, certain gifts are tax-exempt when contributing to IRS-approved charities, spouses, gifts for medical expenses or tuition expenses.