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IRS Raises Lifetime Limit For Tax-Free Gifts
Published February 25, 2014
There are two different IRS limits that affect how much an individual can give to another without a gift tax being imposed: an annual exclusion and a lifetime exclusion. In 2014, the annual limit is not changing, while the lifetime limit is increasing.
During 2014, one may give up to $14,000 to each recipient before having to file a gift tax return, the same limit as in 2013. Spouses can double the size of a gift by combining their exclusions. This is a per-person exclusion, so a married couple could give $28,000 to an adult child, another $28,000 to the adult child’s spouse, and another $28,000 to each of their grandchildren.
One may still make a payment for someone, for instance tuition or medical expenses, without the amount counting as a gift.
Giving more than the annual limit to an individual does not necessarily mean that one will owe a gift tax. Any amount above the annual exclusion counts toward the lifetime exclusion, which has increased to $5.34 million as of 2014, from $5.25 million in 2013. Any gifts above that amount during one’s lifetime may be subject to a gift tax of up to 40 percent.
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