2021 Gift Tax Exclusion - What You Need To Know
The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The gift tax applies to all transfers of money or property made with the intention of making a gift. Gift taxes are paid by the donor, not the recipient. In 2021, the gift tax exclusion is $15,000 per beneficiary, per year.
The gift tax exclusion is the amount of money an individual can give away to someone else each year without having to pay any gift tax. The amount of the exclusion is adjusted for inflation each year and for 2021, the exclusion is $15,000. This means that individuals can give up to $15,000 to any number of people each year without having to worry about the gift tax.
In addition to the $15,000 exclusion, individuals can also give away larger amounts of money without owing gift tax. The lifetime gift tax exclusion is $11.7 million in 2021. This means that individuals can give away a total of up to $11.7 million over the course of their lifetime without owing any gift tax. Any amount given away above the lifetime exclusion is subject to the gift tax.
The gift tax exclusion is a great way for individuals to give money away to family and friends without having to worry about owing any taxes. It also allows individuals to transfer wealth to younger generations without having to worry about the gift tax. However, it is important to be aware of the gift tax rules and make sure to stay within the annual and lifetime exclusion amounts.
Gift Tax Exclusion Rules
In order to qualify for the gift tax exclusion, the gift must meet certain criteria. The first requirement is that the gift must be made with the intention of making a gift. This means that the donor must not receive any benefit, or less than full value, in exchange for the gift. Additionally, the gift must be a “present interest”, which means that the recipient must be able to enjoy the gift immediately rather than in the future.
Another important rule is that the gift must be made to an individual, not to a trust or estate. Gifts to trusts and estates are not eligible for the gift tax exclusion. Additionally, the gift must be in the form of money or property; services are not eligible for the gift tax exclusion.
Finally, the gift must be a “donee” gift, which means it must be given to an individual, not a corporation or organization. The donee must also be a U.S. citizen or a resident alien in order for the gift to qualify for the gift tax exclusion.
Gift Tax Exclusion Strategies
One of the most popular gift tax exclusion strategies is to give the annual exclusion amount to as many people as possible. This allows individuals to maximize their gifting without owing any gift tax. The annual exclusion can be given to anyone, including family members, friends, charities, or anyone else. Additionally, the annual exclusion can be given multiple times throughout the year as long as the total amount given to each individual does not exceed the annual exclusion amount.
Another popular gift tax exclusion strategy is to utilize the lifetime exclusion amount. This allows individuals to give away a large amount of money over their lifetime without owing any gift tax. However, it is important to note that any amount given away above the lifetime exclusion will be subject to the gift tax. Additionally, it is important to keep track of gifting throughout the year and make sure the total amount given does not exceed the annual or lifetime exclusion amount.
Conclusion
The gift tax exclusion is a great way for individuals to give money away to family and friends without having to worry about owing any taxes. The annual exclusion amount is $15,000 in 2021, and the lifetime exclusion amount is $11.7 million. It is important to be aware of the gift tax rules and make sure to stay within the annual and lifetime exclusion amounts. Additionally, there are several gifting strategies that can be used to maximize the amount of money that can be given away without owing any gift tax.