For 2013, you can make a gift of up to $14,000 to any person without having to use any of your lifetime gift tax exemption. If you exceed this amount to any one individual in 2013, the excess may be considered a taxable gift, and you will have to file IRS forms. However, whether your estate will owe any taxes at your death depends on many factors, including the total amount of taxable gifts made during your lifetime and the amount of your taxable estate. For example, if your taxable gifts totaled $2.0 million and were made in 2011, your estate should not incur federal estate taxes if you died in 2013 assuming that your taxable estate did not exceed $3.25 million (or potentially up to $8.5 million if your spouse died before you and your estate is eligible to utilize the unused portion of your spouse's estate tax exemption).
Generally, you can assume that most gifts are counted against your lifetime gift tax exemption; however, the following types of gifts are not counted against your exemption amount:
- Gifts to an individual that do not exceed the annual exclusion amount per individual ($14,000 for 2013)
- Tuition or medical expenses you pay directly to the provider for the benefit of someone else
- Gifts to your spouse, assuming spouse is a U.S. citizen
- Gifts to a political organization for its use
- Gifts to qualified charities
For gifts that do not fit into these categories, the amounts will be counted against your lifetime exemption amount and any excess gift will be taxed at the then-current rate, currently 40%. You will be responsible for paying the gift tax, unless you have made special arrangements with the person receiving the gift to pay the tax instead.
Please be aware that certain states also apply state gift taxes. Before making any sizable gifts during your lifetime, make sure to consider how these gifts might affect your estate and any possible federal or state tax ramifications. Be sure to consult an estate planning attorney who practices in your state of legal residence.