Each year, the annual gift tax exclusion gives individuals the opportunity to make gifts without being required to file a gift tax return, use any lifetime exclusion amount or pay any gift tax. For 2012, the amount of the annual gift tax exclusion is $13,000. This means that an individual donor can give up to $13,000 to any number of donees during the year without the imposition of any gift tax. A married couple can double this amount to $26,000, by making a split-gift election on a timely filed gift tax return or by making separate gifts of $13,000.
In 2013, the annual gift tax exclusion amount will increase to $14,000. Gifts in excess of the annual exclusion amount require the filing of a gift tax return and are credited against an individual’s gift tax lifetime exclusion, which is currently $5,120,000. Unless Congress acts, this lifetime exemption amount is one of the tax provisions that is set to expire at the end of the year, reducing the gift tax exemption to $1,000,000.
Learn more about tax planning and law on our Estate Planning and Tax practice page.