What Are the Federal Gift Tax Rules?


Quick Answer

The federal gift tax rule is that when money or property is exchanged without the expectation of receiving at least something of equal value in return, gift tax may apply, according to the IRS. Gift tax often applies to low- or no-interest loans or free use of property.

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Full Answer

The donor is generally responsible for paying the gift tax, the IRS explains. Special arrangements can be made for the donee to pay the gift tax. The IRS recommends discussing the situation with a qualified tax professional before entering into such an arrangement.

Generally speaking, any gift is subject to the federal gift tax with some exceptions, states the IRS. Exceptions include gifts with values under the calendar year exclusion, tuition and medical expenses paid on behalf of another, gifts to a spouse and gifts to political organizations. As of 2015, the annual exclusion is $14,000 per donee. If a gift comes from both members of a married couple, the exclusion is $28,000 per donee couple. Gifts are not tax-deductible, with the exception of donations to charitable organizations. The amount of a gift of property is determined by the amount below the fair market value that the property is transferred to the donee.

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