Gift Tax 101

Each year, you are allowed to give another person up to the annual gift tax exclusion ($14,000) without reporting the transfer to the IRS or paying taxes on the sum.  For any gifts above this limit, you must report the excess to the IRS through Form 709.  The sum will be subtracted from you total lifetime gift and estate tax exclusion.  As of now, you can transfer up to $5.43 million in assets federal-tax-free over your lifetime. 

There are ways to get around the limit and avoid any risk of estate taxes.  For example, if you are married, you and your spouse can give up to $28,000 per year.  If you are paying tuition or medical expenses for another person you are also able to get around the gift-tax rule since both of these types of gifts are non-taxable.

See Kerri Anne Renzulli, When Does a Gift Trigger a Tax Bill?, Time Money, May 5, 2015.