What are taxable gifts?
The overwhelming majority of lifetime taxable gifts made by taxpayers are gifts made to family members. Transfers to a spouse typically are covered by a separate unlimited marital deduction, which preserves the unified credit for other transfers. Any transfer to a child or other non-spouse that exceeds the $10,000 annual gift tax exclusion per person is subject to gift tax and will reduce the gifting limit. The “annual exclusion amount” was indexed for inflation in 1999, but as of 2001, it is still $10,000. At the current rate of inflation it should be years before the exclusion amount increases by even as much as $1,000. Because of the slow impact of indexing and the extended phasing in of other benefits, the new tax law is not expected to have a dramatic impact on estate or gift tax planning. The schedule of increases are shown below.
