How much money can a person receive as a gift without being taxed USA?

Understanding Gift Taxes in the United States: What You Need to Know

In the United States, gift taxes are imposed on the transfer of property or money without receiving anything of value in return. To ensure fairness and prevent tax avoidance, the government has established specific rules and guidelines regarding gift taxation.

Annual Exclusion: A Tax-Free Threshold

The annual exclusion for gift taxes is an important concept to understand. In 2024, each individual can give gifts totaling up to $18,000 per year to an unlimited number of recipients without incurring any gift tax. This means that if you gift less than $18,000 to each person, your gift will be tax-free.

Exceeding the Annual Exclusion: Tax Implications

If you surpass the annual exclusion for a particular recipient, gift taxes may apply. However, it’s important to note that exceeding the exclusion does not automatically trigger a tax. The amount of tax owed depends on several factors, including:

• The amount of the gift
• The lifetime gift tax credit available
• The use of gift splitting (discussed below)

Gift Tax Rate Structure

The gift tax rate structure is progressive, meaning that the tax rate increases as the value of the gift increases. The tax rates for gifts in 2024 are as follows:

• 18% for gifts over $11,880,000
• 40% for gifts over $23,760,000

Lifetime Gift Tax Credit

Every individual has a lifetime gift tax credit that allows them to give a certain amount of money over their lifetime without paying gift taxes. In 2024, the lifetime gift tax credit is $12,920,000.

Gift Splitting

Married couples can use gift splitting to reduce their gift tax liability. By splitting a gift between both spouses, they can effectively double the annual exclusion to $36,000 per recipient.

Tax Considerations for Gifts of Property

Gifts of property, such as real estate or stocks, are also subject to gift taxes. The value of the property for gift tax purposes is typically determined by its fair market value on the date of the gift.

Reporting Gift Tax

Donors are required to report gifts over the annual exclusion on their annual gift tax return (Form 709). Failure to file a gift tax return can result in penalties.

Conclusion

Understanding gift taxes in the United States is crucial to avoid potential tax liabilities. By being aware of the annual exclusion, gift tax rates, and other relevant rules, individuals can plan their gift-giving strategies effectively to maximize the tax benefits and reduce their overall tax burden. If you have any questions or concerns regarding gift taxes, it is advisable to consult with a qualified tax professional for personalized guidance.