The annual gift tax exclusion will increase from $12,000 to $13,000 effective January 1, 2009, the Internal Revenue Service (IRS) just announced. The gift tax exclusion is the amount the IRS allows a taxpayer to gift to another individual without reporting the gift. This is not a limit on giving, it is a tax filing threshold. You are always free to give more than the threshold, but then you must file a gift-tax return. The life-time exclusion amount of $1 million means that most people won’t ever have to pay gift tax – only those making total lifetime gifts above that amount will owe any tax.
The increase in the yearly exclusion amount means that more can be given away for estate tax planning purposes in any one year. For example, a married couple with four children will be able to give away up to $104,000 in 2009 with no gift tax implications. You don’t have to give to just children though, you can give to anyone that you would want to benefit, including relatives and friends.
The tax code permits the yearly gift tax exclusion, which has been $12,000 since 2006, to rise when inflation would produce an increase of $1,000 or more. This year’s inflation figures pushed the amount above the next $1,000 threshold.
Always consult your professional advisors before deciding on making gifts and taking other tax planning measures.
For more on this and other inflation-adjusted tax figures for 2009, go to:http://www.irs.gov/newsroom/article/0,,id=187825,00.html
