What is the annual gift tax exclusion, and how does it work?
The federal gift tax law provides for an annual gift tax exclusion which allows individuals to give away tax-free a certain amount per year per person to as many persons as they wish. This annual gift tax exclusion was $10,000 for many years. The Taxpayer Relief Act of 1997 provides that the annual exclusion will be indexed for inflation beginning in 1999. The annual exclusion will be increased by the amount of annual inflation but only in minimum increments of $1,000, rounded down to the nearest $1,000. The exclusion in 2003 is $11,000.
