IRS Raises Lifetime Limit For Tax-Free Gifts

There are two different IRS limits that affect how much an individual can give to another without the imposition of a gift tax: an annual exclusion and a lifetime exclusion. In 2014, the annual limit is not changing, but the lifetime limit is increasing.

During 2014, one may give up to $14,000 to each recipient before having to file a gift tax return, the same limit as in 2013. Spouses can double the size of a gift by combining their exclusions. This is a per-person exclusion, so a married couple could give $28,000 to an adult child, another $28,000 to the adult child’s spouse and another $28,000 to each of their grandchildren.

One may still make a payment for someone, including for tuition or medical expenses, without the amount counting as a gift.

Giving more than the annual limit to an individual does not necessarily mean that one will owe a gift tax. Any amount above the annual exclusion counts toward the lifetime exclusion, which has increased to $5.34 million as of 2014 (from $5.25 million in 2013). Any gifts above that amount during one’s lifetime may be subject to a gift tax of up to 40 percent.

Learn more from an estate planning attorney at Littman Krooks by visiting http://www.elderlawnewyork.com/.

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