What gifts are subject to the federal gift tax?


Well, essentially all gifts are subject to the federal gift tax, but what we have is relief from the gift tax. The first form of relief of course is the annual gift tax exclusion. That means that each individual, each person, can give away to another person $14,000 worth of value, whether it’s cash, or in some other form, or some other asset, and they don’t even have to report that gift. That’s complete relief from the gift tax. When we exceed giving $14,000 to any individual person, now we start to use up our lifetime gift tax exemption of $5.49 million, which happens to be the same exemption that we use for estate tax purposes. The gift tax and the estate tax are virtually the same tax. When we exceed our lifetime exemption, then gifts will be taxed at 40%.

Note: The Tax Cut and Jobs Act of 2017 signed into law in December 2017 increased the exemption amounts mentioned in these videos. The personal estate, gift, and generation-skipping tax lifetime exemption was increased to $11.18 million per person. The annual gift tax exclusion was increased to $15,000 per donee per year.

Both amounts are indexed for inflation and may increase year over year until December 31, 2025, when the law sunsets and reverts to 2017 values.