Gift Tax

The gift tax unified credit that is available with respect to taxable transfers by gift is a total of $5,340,000  2014 .  Taxation on gift amounts over $5,340,000 is 40%.   You can give away a cumulative total of up to $5,340,000 to whomever you desire during your life without owing any federal gift tax. The gift tax is imposed on lifetime transfers of property for less than adequate and full consideration in money or money's worth. A transfer is subject to gift tax once it becomes a completed gift. To the extent you use this exemption amount against a gift tax liability, it reduces (or eliminates) the credit available for use against the federal estate tax at your death as the total amount of taxable gifts given during your life would be cumulative and subtracted from your regular unified credit available in the year of death ($5 million in 2011 and $5.2 million in 2012 and 2013 with a tax rate of 35%).  

The gift tax is said to be determined on a tax-exclusive basis. In contrast, at your death, your gross estate includes the money that will be used to pay the estate tax (a tax-inclusive calculation). If you made substantial lifetime gifts, you may enjoy a significantly lower tax on the gifts than ultimate estate tax because the money used to pay the gift tax is never included in the tax base used to calculate the amount of the gift (you must survive the gift for three years).

There is an annual gift tax statutory exclusion in the amount of $14,000 for 2014 that allows an individual to make gifts up to this amount to multiple donees each year free of tax (Lifetime Gifts Using the Annual Exclusion). Additionally, most gifts or transfers between spouses pass free from gift and estate taxation (see Marital Deduction and Utilizing the Unified Credit). Also, there are multiple tax benefits involved with gifts or transfers to qualified charities (see Charitable Trusts).

The tax on gifts given during your lifetime over the unified credit amount is currently 40%. 

 
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