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Annual Gift Tax Exclusion Increases in 2013

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All individuals have the opportunity to give gifts annually to any person without having to file a gift tax return.  For 2012, the amount of the annual exclusion is $13,000.

This means that anyone can give a gift of up to $13,000 to any person for any reason without worrying about possible gift tax implications.  A married couple can double this amount to $26,000.

In 2013, this annual exclusion amount will increase to $14,000 ($28,000 for couples).

For amounts given in excess of the annual exclusion amount, every individual has a lifetime exclusion amount, against which the excess gifts are credited.  For 2012, the lifetime exclusion amount is $5,120,000.  This lifetime exclusion amount is one of the tax law provisions that is set to expire at the end of 2012, along with the other “Bush Tax Laws”.

If allowed to expire, the lifetime gift tax exclusion amount will revert to the 2001 amount, which was $1,000,000.  It’s hard to guess exactly how Congress will handle this particular provision, but it is anticipated that the majority of the Bush Tax Laws will be extended intact.

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  1. Jane Doe says:

    Please clarify; an individual with 3 grown children could gift (in 2012) $13,000 to EACH child (i.e. $39,000), or just $13,000 TOTAL for the year? Also, I heard that as of 2013 the gift tax “freebie” will be rescinded, resulting in all gifts being taxed. Your article appears to indicate that as of 2013 we can still gift without tax consequences, as long as the amount remains under $14,000. Am I understanding this concept correctly? Thank you!

    1. jblankenship says:

      Yes, you have it correct, each individual could be gifted $13,000 each. If the giver(s) are a couple, the total to each individual could be doubled to $26,000.

      My comments re: 2013 are assuming that the annual gift exemption remains in effect; if the law changes (who knows?) then the current law will apply, naturally.


  2. jblankenship says:

    No, because the basis in the investment is $12,500, and so that would be the limit for the contribution amount.

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