Any property that's transferred by gift from one person to another is subject to the gift tax. Making a gift to someone includes giving property or money to someone without expecting to receive anything in return. You may also be making a gift if you loan money without charging interest of if you sell something for less than it's worth. Some gifts are non-taxable, including those to charities, spouses, certain political organizations, and tuition or medical costs that you pay for someone else. There's an annual gift-tax exclusion for the first gift of $10,000 (ten thousand dollars) of present interest per person. Basically, this means that you can give any number of people up to a $10,000 (ten thousand dollars) gift that they can use free of tax. Any amount in excess of this limit will be subject to taxation. It's possible for a couple to give a gift together to the same person, allowing a $20,000 (twenty-thousand dollar) gift to be made free of tax. Until the sum of your gifts exceeds $675,000 (six hundred and seventy-five thousand dollars), you don't have to pay the gift tax. When you've determined the amount of your taxable gifts, add the value and subtract the total from your allowable Unified Credit. The Unified Credit is based on both the gift tax and the estate tax, covering gifts you give during your lifetime as well as to your estate in the event of your death. You're allowed a certain amount of tax-free gifts throughout your lifetime. The taxes you pay on gifts reduces the overall amount of Unified Credit that can be applied to your estate when you die. The value of any gifts or of your estate in excess of the allotted amount is subject to tax, but gifts less than $10,000 (ten thousand dollars) to the same person do not count against the amount of Unified Credit to which you're entitled. A gift tax is imposed by not only the federal government, but also by some states. For more information on the gift tax, contact a tax professional.
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