The Internal Revenue Service increased the annual gift tax exclusions for 2013. The annual gift tax exclusion amount will increase from the 2012 amount of $13,000 to $14,000 in 2013 for gifts made to anyone other than a person’s spouse. New Jersey does not impose a gift tax, with the limited exception that gifts made within three years of a person’s date of death are subject to tax upon the death of the giver.
Individual annual gift tax exclusions can be combined with gifts of spouses to give up to $28,000 to any person each year and no gift tax will be due. There is no limit as to the number of gifts which may be made to different people. Additionally, there is no limit to the marital deduction for taxpayers who make gifts to their U.S. citizen spouses. The annual gift exclusion for gifts made to non-U.S. citizen spouses is being increased to $143,000 in 2013.
If an annual gift is made during 2013 which exceeds $14,000 to any one person, or if it exceeds $143,000 to a non-US citizen spouse, it is a taxable gift and the giver must file a U.S. Gift Tax Return with the IRS on Form 709. Each person is afforded a lifetime gift tax exemption. At present, the lifetime gift tax exemption amount is $5,120,000. However, that amount is scheduled to decrease to $1,000,000 when the county hits the “fiscal cliff” in 2013 unless Congress acts to change the law. Even if you make an annual gift to an individual over of the applicable annual exclusion amount, the giver will have to file a gift tax return, but will not owe gift tax unless they have exceeded the lifetime gift tax exemption.
In addition to gifts to spouses, certain other gifts are exempt from federal gift tax: gifts of tuition and medical expenses, if they are paid directly to the medical or education institution; gifts to qualified charities; and gifts to political institutions are all not subject to federal gift tax.
The attorneys at McLaughlin & Nardi are available for consultations regarding gift tax liability or using gifts to decrease your taxable estate. E-mail us or call for an appointment.