A Look at the Gift Tax Exemption

How much can you gift in a year, and a lifetime?

Federal tax rules allow you to give away millions of dollars during your lifetime. You can make five-figure gifts of money or property to other individuals in any given year. These gifts may be made without tax consequences … as long as they fall within the IRS annual and lifetime gifting limits.

The annual gift tax exclusion is currently set at $14,000. For the 2016 tax year, you can give away up to $14,000 to as many individuals as you like without any federal tax implications. (This $14,000 limit may or may not rise in 2017.) If you are married, you and your spouse can each give an unlimited number of people up to $14,000 annually. Gifts exceeding $14,000 count toward the lifetime federal gift tax exemption.1

You can currently gift more than $5 million before you die, tax-free. The inflation-adjusted lifetime gift exemption was set at $5.45 million for 2016 and is projected to approach $5.5 million in 2017. This per-person lifetime exemption is portable; if you are married, any unused portion of it is conveyed to your spouse at your death. The lifetime gift exemption is also called the unified credit, as it precisely equals the federal estate tax exemption. Estates or lifetime gifts which exceed the size of the credit are subject to federal estate and gift tax.2,3

Over time, gifting may help you dramatically reduce the size of your taxable estate. This year and every year, it can factor into your estate planning strategy.

 

Kevin Foster, CFP ®
Comprehensive Wealth Manager | Tax Advisor
Chandler, AZ 85226

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC

 

 

1fool.com/retirement/general/2016/01/12/use-the-2016-gift-tax-exclusion-to-beat-the-estate.aspx [1/12/16] 2natlawreview.com/article/2016-estate-gift-and-gst-tax-update-what-means-your-current-will-revocable-trust-and [12/11/15] 3 accountingtoday.com/news/tax-practice/wolters-kluwer-projects-inflation-adjusted-tax-brackets-79294-1.html [9/19/16]