Gift Tax Annual Exclusion Increase in 2013

By Stephen Benevento, CFP, CTFA
From the Winter 2012 Edition of Values


With 2012 coming to a close many of our Walden clients have recently completed their annual gifting. If you are already planning your gifts for 2013, here is some good news: The amount of annual gifts that you may make to a non-spouse individual without triggering gift tax consequences will increase to $14,000 in 2013, up from $13,000 this year.

The annual gift tax exclusion is the dollar value of assets that you may give each year to another person without generating gift tax liability. The exclusion also means that such gifts will not be counted against your allowable lifetime estate and gift tax exemptions. The annual exclusion is applied on a per donee basis, so there is no limit to the number of people to whom you may gift.

Annual gifting is a powerful tool to reduce your taxable estate. In addition to avoiding potential estate tax on the value of the gifted assets, you also avoid taxes on any future appreciation of those assets. Furthermore, if both you and a spouse make a gift, the effective limit per donee is $28,000. Keep in mind that direct payment for tuition and medical expenses are free from federal gift taxes, hence, those don’t need to be counted when maximizing your tax advantaged giving.

While our cover story on the “fiscal cliff” explains the enormous uncertainty surrounding the future of much of our tax code, we are certain about how much you can gift to your loved ones without any tax consequences in 2013: $14,000.

As always, we strongly recommend consulting with your tax advisor prior to making any decisions related to your tax or estate plans.