Taxes can be confusing, and the gift tax is one of the most perplexing of the Internal Revenue Code.
What is the gift tax?
The gift tax is a federal tax on the transfer of money or property to another person while getting nothing (or less than full value) in return. Many people don’t get hit with the gift tax, because the IRS generally doesn’t care about what you give away to other people unless that giving exceeds some lofty amounts. And even if it does, it might mean you just have to fill out some paperwork.
How much can you gift?
Two things keep the IRS’ hands out of most people’s pockets: the $15,000 annual exclusion in 2020, and the $11.58 million lifetime exclusion in 2020. Stay below those and you can be generous under the radar. Go above, and you’ll have to fill out a gift tax form when filing returns — but you will still likely avoid having to pay any gift tax at all.