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The answer is a
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Q. How much money can you give to one person annually without triggering a gift tax return?
a. $12,000
b. $15,000
c. It depends on your income
d. Any amount | The amount you can now give to one person without triggering a gift tax return is currently $12,000 per donor, per recipient, per year.
You might be able to give someone more than this amount for certain expenses. For example, tuition or medical expenses that you pay on behalf of another person do not count.
Don't expect the annual gift exclusion amount to rise every year, since it only increases in increments of $1,000 and is indexed to inflation.
Here's a little history on the gift tax exemption: In 1932, the gift tax was made lower than the estate tax in order to encourage people to transfer their wealth during their lifetimes. A lifetime exemption was established, and the first annual gift exclusion was set at $5,000 per recipient.
But in the decades that followed, numerous changes came in quick succession, most of which resulted in higher gift and estate taxes. The incentive to transfer wealth through gifts was greatly diminished. It wasn't until 1982 that the annual gift exclusion amount was raised to $10,000 (accompanied by other changes). The per donee amount then remained at $10,000 for two decades.
The Taxpayer Relief Act of 1997 stipulated that the exclusion become indexed to inflation and increase in increments of $1,000. Even so, it took until 2002 for inflation to push the value of a dollar far enough to justify raising the exclusion to $11,000. And on January 1, 2006, the amount rose to $12,000, where it is scheduled to remain through the end of 2008.
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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