Best QuickBooks Consulting & Training in Apopka, FL

A Simplified Guide to Understanding the IRS Gift Tax for 2023 Most people understand that they need to pay taxes to the government, but many are unaware of the IRS gift tax. The IRS imposes a gift tax on certain transfers of property that involve no exchange of value, such as giving money or assets to someone without receiving anything in return. Understanding the gift tax can help you avoid unnecessary tax penalties. In this blog, we’ll look at the IRS gift tax, what it entails, and how it can affect your gift-giving activities. Basics of Gift Tax The primary IRS gift tax rules are straightforward: if you give someone money or property worth more than the annual gift tax exclusion, you must file a gift tax return and pay tax on the excess amount. The annual gift tax exclusion is currently $17,000, meaning you can give up to $17,000 to an individual in one year without incurring the gift tax. The lifetime federal estate and gift tax exemption, on the other hand, is $12.92 million. Lifetime Exemption The lifetime exemption for federal estate and gift tax, combined, is $12.92 million. This means that during your lifetime, you can give away up to $12.92 million without paying any federal gift tax. However, if you give away more than this amount, you’ll have to pay a tax on the excess. Also, as with gift taxes, if you are married, your spouse is entitled to their own $12.92 million lifetime exemption.