By Attorney Ted Brown
The IRS recently announced that the annual gift exclusion amount will increase to $14,000 per person in 2013. This means that an individual can gift up to $14,000 per person without having to file a Federal Gift Tax return.
Gifting in excess of $14,000 does not necessarily mean that gift tax will be owed, it only means that the gift must be reported. Only when an individual exceeds the lifetime exclusion amount will gift tax be imposed. In 2013, the lifetime exclusion amount will decrease to $1 million dollars.
It is important to remember that gift tax rules only apply to the GIVER. The recipient of the gift is never taxed on the value of the gift they receive, regardless of the amount. They do not need report the gift as income on their taxes because it is not considered “income” within the meaning of I.R.C. Section 61.