18
Apr

The annual gift tax exclusion for 2015 & 2016 allows an individual to give away $14,000 to an unlimited amount of people free of federal tax consequences. Owing a gift tax is not a common concern for many taxpayers. The federal limit is $5.34 million, however just because you may not have to pay a tax, you may still have to complete a gift tax return. If you give a gift over the $14,000 limit, you must file Form 709, even if you don’t owe any tax because of the $5.34 lifetime exclusion. If there is a tax due, it is usually the Gift giver, not the recipient who pays the tax.

Some gifts are exempt from the federal gift tax. The taxpayer is allowed to make unlimited gifts when it pertains to: Charitable contributions, payment of another’s medical expenses. (The payment must be made directly to the medical service provider. You will not be allowed an exclusion if you make the payment directly to the individual and they then submit the payment to the medical service provider), gifts that cover tuition expenses (similar to medical expenses, the payment must be made directly to the educational institution) and gifts made to a spouse.

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