Although we don’t prepare income tax returns in our office, I am frequently asked about the tax consequences of various types of gifts. The general rule is that all gifts are taxable unless they fit into an exception. Fortunately, the exceptions are many.
Briefly, the following gifts are not taxable:
If a gift does not fit into one of the exceptions, it is taxable. No gift tax is paid, however, until an individual’s total taxable gifts exceed the lifetime exemption – which is currently $5.43 million. This lifetime exemption is “portable,” meaning that if one spouse dies before using up his or her entire exemption, the surviving spouse may use the remaining exemption amount. This feature is relatively new and, as you can imagine, opens up many planning opportunities.