July 22, 2013   Giving

IRS Gift Tax Limits Increased for 2013

Form 709 One of the most commonly ignored tax documents is Form 709. This form, which must be filed along with a person’s income taxes on on April 15, is used to assess the federal gift tax.
For purposes of the federal gift tax, a gift is considered to be any transfer of assets from one individual to another for which the transferring individual receives nothing, or less than the full value of the gifted asset in return. Besides traditional gifts, the IRS may also find that an individual gave a gift when he or she sold an item for a price below its full value, or made a loan at a reduced interest rate. Importantly, the federal gift tax applies to transfers that meet the IRS criteria, regardless of whether the transferring party intended the transfer to be a “gift” in the traditional sense of the word.
Every year, individuals are permitted to give a specified amount to as many individuals as they wish, tax-free. For the year 2013, the gift tax exclusion is $14,000 per recipient. This means that, in 2013, a single person can gift $14,000 to each of an unlimited number of recipients. Spouses can combine their gift tax exclusions to double the amount that they are able to give per recipient. A married couple, for example, could give a total of $28,000 to each of of their children and grandchildren, tax-free. These gifts do not need to be reported to the IRS.
Gifts in excess of the yearly gift tax exclusion must be reported on Form 709. Not only will taxes be assessed on these amounts, but these amounts will also apply toward a person’s lifetime estate exclusion amount ($5.12 million in 2012).
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