If you aren’t very familiar with gift taxes and have never had to pay them previously, please read this overview of how they work and some of their details.
The gift tax is a tax levied by the federal government on a taxpayer who gifts property or money to another person.
The gift tax amount is based on the size of the gift and can range from 18% to 40%.
The Internal Revenue Service (IRS) sets limits on the value of gifts a person can give before being required to file a return and be taxed on the gifts.
Some gifts are excluded from the gift tax. They include gifts given to political organizations, spouses (US citizens), or gifts used for tuition and medical expenses.
The federal government offers an annual and a lifetime gift tax exemption on gifts up to a certain amount.
In 1997, the annual gift tax exclusion amount was $10,000. In 2021, the annual gift tax exemption was $15,000. This means that you could give someone else money or other gifts up to $15,000 in value in the year 2021 without paying taxes on those specific gifts. Above that $15,000 may be subject to gift taxes.
If you are unsure about your tax situation, consult your CPA or a qualified Tax Attorney.