Gift Tax

How much can I gift each year?

Most people think you can only gift $15,000.00 per recipient in 2019.  You might be surprised to hear that you can gift a lot more than that.  You might be saying, “I thought the annual federal gift tax exclusion is $15,000.00”.  While you are correct, it is important to keep in mind the interplay between the federal gift tax limits and the federal gift tax and estate tax exemptions.

In 2019, the federal gift and estate tax exemption amount is $11,400,000.00.  If your lifetime gifts or the value of your estate upon death exceeds this amount, you will pay gift and/or estate taxes.  That means that you can gift during your lifetime or die with $11,400,000.00 tax-free.    The purpose of the annual gift tax exclusion is to allow for the gifting of assets above and beyond the lifetime exemption, because gifts made at or below the gift tax exclusion are not counted (i.e., they are excluded) when calculating how much you’ve gifted during your lifetime.

In order to more fully understand this concept, it helps to understand the history of the gift tax exclusion.  Let’s go back almost twenty years to 1999 when Y2K was a greater concern than gift taxes.  Back then, the exemption amount was only $650,000.00.  It was not uncommon for someone to have an estate that exceeded this amount.  Thus, if that person gifted or died with more than $650,000, taxes would be paid.  The annual gift tax exclusion was $10,000.00 and provided some relief.  If a taxpayer worth more than $650,000 adhered to a gifting strategy, annual exclusion gifts could have been made to an unlimited number of recipients, which would have lowered the taxpayer’s taxable estate upon death and reduced estate taxes.    

Now that the exemption amount has been increased to $11,400,000.00, however, most Americans do not have a gift or estate tax issue.  Thus, the increased exemption amount has rendered the annual gift tax exclusion meaningless to most.  With such an exemption amount, limiting your gifts to $15,000.00 stops making sense.    

Salvatore M. Di Costanzo is a partner with the firm of Maker, Fragale & Di Costanzo, LLP located in Rye, New York, and Yorktown Heights, New York. Mr. Di Costanzo is an attorney and accountant whose main area of practice is elder law and special needs planning. He is a member of the National Academy of Elder Law Attorneys and a frequent author and lecturer on current elder law and special needs topics. Since 2013, Mr. Di Costanzo has been selected each year by the rating service, Super Lawyers as a New York Metro leading elder law attorney.  He can be reached at (914) 925-1010 or via e-mail at smd@mfd-law.com.  Visit his practice specific website at  www.plantodayfortomorrow.com.