Annual Exclusion for Gift Tax

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Annual exclusion for Gift Tax

A separate annual exclusion applies to each person to whom you make a gift. For 2004, the annual exclusion is $11,000. Therefore, you generally can give up to $11,000 each to any number of people in 2004 and none of the gifts will be taxable.

If you are married, both you and your spouse can separately give up to $11,000 to the same person in 2004 without making a taxable gift.

Inflation adjustment: After 2004, the $11,000 annual exclusion may be increased due to a cost-of-living adjustment. See the instructions for Form 709 for the amount of the annual exclusion for the year you make the gift.

Example 1: In 2004, you give your niece a cash gift of $8,000. It is your only gift to her this year. The gift is not a taxable gift because it is not more than the $11,000 annual exclusion.

Example 2: You pay the $15,000 college tuition of your friend. Because the payment qualifies for the educational exclusion, the gift is not a taxable gift.

Example 3: In 2004, you give $25,000 to your 25-year-old daughter. The first $11,000 of your gift is not subject to the gift tax because of the annual exclusion. The remaining $14,000 is a taxable gift. You may not have to pay the gift tax on the remaining $14,000 due to your unified credit balance, however, you do have to file a gift tax return.

More information. See Form 709 and its instructions for more information about taxable gifts.

Source: IRS Publication 950 IRS PUB 950

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