Question: When are gift taxes due and who pays them?
Answer: Gift taxes are due on certain transfers of wealth. If and when gift taxes are due, the donor is liable for them. The recipient of the gift is not taxed. (Note that gifts to charity are not subject to gift taxes.)
The combined estate and gift exemption under the American Taxpayer Relief Act of 2012 is $5 million. The exemption is adjusted for annual inflation. The 2013, 2014, and 2015 exemptions are $5,250,000, $5,340,000, and $5,430,000 respectively.
In addition, you’re entitled to make annual gifts of up to $14,000 in 2013, 2014, and 2015 (adjusted for inflation annually) to as many individuals as you like without incurring a gift tax. The tax law lets you give away more than this annual limit in certain cases. You can generally make unlimited gifts to your spouse. You can pay an unlimited amount of medical or tuition expenses for another person as long as your payments are made directly to the institution.
Gifts beyond the limits indicated are subject to tax at a maximum rate of 40%.
