What Are Gift Tax Rules?
The gift tax was implemented to discourage people from trying to evade estate taxes by giving their assets away before their death. The Internal Revenue Service defines a gift as “any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.” A gift that’s given in return for a service, or something like that, isn’t considered a gift by the IRS. Gift tax is the responsibility of the giver of a gift. However, if the giver doesn’t pay the gift tax for whatever reason, the receiver of the gift will need to pay the gift tax. If a parent gifts an amount to their child that is more than the annual exception rate, the parent can work out a situation where the child needs to pay the gift tax instead of them. The annual exception rate is currently $14,000 per recipient.