Any property or assets given as a gift (including money) are subject to the federal gift tax. However, there are numerous exceptions. Here are some ways you can transfer assets without incurring gift taxes:
- Give an unlimited number of people gifts up to $14,000 each per year ($28,000 if you're married). These gifts are called annual exclusion gifts.
- Pay any amount toward another person's tuition or medical expenses, as long as you pay these amounts directly to the school or medical provider.
- Give any amount to your spouse.
- Give any amount to charity.
If you make contributions to a Section 529 college savings plan or prepaid tuition plan on behalf of another person, you can contribute up to five years of annual exclusion gifts, or $70,000, in a single year ($140,000 if you're married), provided that you make the proper election on a timely filed gift tax return. If the election is made, then any additional gifts over the annual exclusion amount to that individual during the five-year period will be subject to gift tax. If you die before the end of the five-year period, a prorated portion of your gift will be subject to estate tax.
Even if you make a taxable gift, you don't have to pay tax until you exhaust your gift tax exemption amount. This exemption currently allows for $5.25 million of taxable gifts to be made during your lifetime before a tax payment is required.
You should always consult with your tax advisor so that your overall circumstances can be taken into consideration and that you're properly reporting the gifts.
Source: The Vanguard Group, Inc.