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The Gift Tax And You

The annual exclusion for gifting to an individual is $13,000. For every dollar you go over this limit, you will reduce your lifetime exclusion of 1 million dollars. So lets say you decide to give your daughter a gift of $100,000 this year because she needs the money to pay off creditors, you will need to file a gift tax return come next April. There will be no gift tax due at that time, however the IRS will now know that your lifetime exemption is $913,000. (1 million less $87,000 since $13,000 of the $100,000 is entitled to the annual exemption).

Another option to consider is to lend the $100,000 to your daughter. By doing this and charging the applicable federal rate, the amount will not be deducted from your lifetime exclusion.

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