Question: In one of your recent columns you said that we can give/receive a gift of up to $5 million without paying taxes. I thought the gift allowance amount was $13,000 a year. What is the difference? – GF
Answer: There are two separate and distinct gift tax breaks.
The “annual exclusion” is $14,000 (in 2014). Gifts in one calendar year to an individual which total at or below that amount do not need to be reported to the IRS by the giver or by the receiver.
The “lifetime exemption” is $5.34 million (2014). Anytime you gift greater than $14,000 to an individual in a year, you must file a gift tax return with the IRS to report the gift. The lifetime exemption can then be claimed to offset the tax, so you pay no gift tax until you use up your $5.34 million exemption. Again, the receiver pays no tax on the amount received.
A BRIEF is a short answer to a legal question.