How The Gift Tax Works

Each year millions of Americans give a gift to other individuals
that they know. Gifts can be considered anything from a new
vehicle, to a trip, to a piece of land. A gift tax is a tax that
is imposed when an individual gives away a certain amount of
gifts that are considered valuable.

According the Internal Revenue Service (IRS), an individual who
gives a gift or a combination of gifts to one person that is
valued at over eleven thousand dollars must pay a gift tax. The
Internal Revenue Service (IRS) does not require that the
individual who received the gift pays the gift tax. The only
individual who is responsible for reporting and paying the gift
tax is the person who gave the gift away. A gift is when
something is given away at no cost. The Internal Revenue Service
(IRS) defines a gift as something that is given away without
receiving anything of similar value in return. Gifts that are
recognized by the government include property and money.

There are a number of exceptions to the gift tax imposed by the
Internal Revenue Service (IRS). Gifts that are given to a spouse
are not considered taxable. Another gift tax exclusion includes
gifts that are used for education or medical expenses. This gift
tax is often applied when a close family friend or family
relative pays a portion of the college tuition expenses or
medical expenses of someone they know. Gifts that are given to a
charity are also not considered taxable. Individuals can donate
their land, their vehicle, or money to an established charity
and it will not be considered taxable. http://www.ta
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Individuals who give a taxable gift that exceed eleven thousand
dollars are required to file a Form 709: United States Gift (and
Generation-Skipping Transfer Tax Return). The Form 709 can be
obtained by contacting the Internal Revenue Service (IRS) or by
printing the form off of the Internet. It is also possible to
obtain an online form by visiting the website of the Internal
Revenue Service (IRS) at http://www.irs.gov. This form comes
in a PDF format that allows individuals to enter in their
information using the computer, and they can print off the
completed forms to be mailed to the Internal Revenue Service
(IRS).

In addition to the eleven thousand dollars a year gift tax
restriction, individuals are also subject to a lifetime gift tax
limit. That lifetime limit is one million dollars. Individuals
who exceed one millions dollars in gifts in any number of years
are required to start paying taxes on any more gifts that are
given in the future. This means that even if an individual gives
a gift that is less than eleven thousand dollars, the next year
they are still required to pay a gift tax because they exceeded
their lifetime gift tax allowance.

Giving another individual or charity a gift of money or property
is a great way to reduce the likelihood of having to pay an
estate tax later on in life. In addition to offering a number of
tax benefits, a gift also allows individuals to give back to
their children, family, friends, or community.