One of these exclusions is the $14,000 per year, per person gift tax exclusion. You can give as much as $14,000 to any number of gift recipients within a calendar year free of taxation. This $14,000 figure is in place at the time of this writing in 2015, but it is periodically increased to account for inflation.
This $14,000 per person, per year exclusion can be very useful if you want to transfer assets tax-free over an extended period of time. If you are married, you and your spouse could combine your exclusions to give up to $28,000 per person, per year tax-free.
For example, let’s say that you have a married son. You could give your son $28,000 tax-free within a calendar year, you could give your daughter-in-law the same amount. In all, you could transfer $56,000 to your son’s family each year free of taxation.
Unified Lifetime Gift & Estate Tax Exclusion
In addition to the $14,000 per person annual exclusion, there is also a unified lifetime gift and estate tax exclusion. The amount of this exclusion is $5.43 million in 2015. You could use a portion of your unified lifetime exclusion to give tax free gifts to individual recipients that exceeded $14,000 in a calendar year.
The $5.43 million figure is accurate for 2015, but it is annually adjusted to account for inflation. Next year, you will probably see a somewhat higher figure.
We should point out the fact that there is an unlimited marital gift and estate tax deduction. This allows you to transfer unlimited assets to your spouse free of transfer taxes, as long as your spouse is a citizen of the United States.
If you want to pay school tuition for students, you can do so without incurring any gift tax liability. However, this exclusion only extends to tuition. It does not include books, fees, and living expenses.
Of course, you could use your $14,000 annual exclusion to provide additional support.
You can pay medical bills for other people free of the gift tax. This exclusion extends to health insurance purchases, but you have to pay the providers directly.
Schedule a Free Consultation
All of the rules that govern taxes on asset transfers can be confusing, and these are the federal rules. We practice law in New York, and there is a state-level estate tax to contend with in our state as well.
If you would like to discuss things with a licensed professional, our firm can help. We offer free consultations, and you can contact us through this page to set up an appointment: Naples NY Estate Planning Attorneys.
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