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After remaining constant for five years, the amount you can gift to any one individual in a particular year without reporting it to the IRS will increase in 2018.
For the past five years, the annual gift tax exclusion amount was $14,000. Beginning in 2018, the annual amount will rise to $15,000. This means that any person who gives away $15,000 or less to any one individual, besides their spouse, does not have to report the gift to the IRS.
Should you give away more than $15,000, you will not necessarily have to pay taxes, however, you will have to file a gift tax return (Form 709). During an individual’s lifetime, the IRS allows $5.6 million to be gifted before a gift tax is owed. For a couple, they may give away $11.2 million during their lifetime (in 2018). This means, even if you were to gift over the annual gift tax exclusion amount in 2018 to a particular person, you will only owe taxes if you have given away more than a total of $5.6 million (or $11.2 million) in the past. As a result, the filing of a gift tax return is purely a formality for almost everyone.
The gift tax also applies to property, such as stock. If you gift property that is worth more than $15,000, you will have to report it on your gift return.
If a gift is made to a spouse, as long as the spouse is a US citizen, the amount is not usually subject to any federal gift taxes. If your spouse is not a US citizen, only $152,000 may be gifted before reporting the gift must be reported to the IRS (in 2018).
If a tax-deductible gift is made to a charitable organization, you do not need to report it on the gift tax return. However, if you retain some interest in the gifted property, you will have to record the donation.
If you are planning on making a large gift to an individual and have a question as to whether or not you will have to report this gift to the IRS, or if you will need to pay taxes on the gift, contact a knowledgeable tax attorney before doing so.