Annual Exclusion

AAA

DEFINITION of 'Annual Exclusion'

The amount of money that may be transferred by gift from one person to another each year without incurring a gift tax or affecting the unified credit. This amount can be transferred in the form of cash or other assets.

INVESTOPEDIA EXPLAINS 'Annual Exclusion'

The annual exclusion has no limits on the number of persons that can receive this amount each year. For example the annual exclusion for 2011 was $13,000. This means that a wealthy individual might, for example, gift $13,000 to ten different people in one year without incurring a gift tax. Also, married couples can combine each partner's $13,000 annual exclusion amount to gift up to $26,000 per individual, or up to $52,000 per couple, every year. This gifting strategy is often used to reduce the size of one's taxable estate.

RELATED TERMS
  1. Unified Tax Credit

    A tax credit that is afforded to every man, woman and child in ...
  2. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  3. Cost Basis

    1. The original value of an asset for tax purposes (usually the ...
  4. Gift Tax

    A federal tax applied to an individual giving anything of value ...
  5. Dividend Rate

    The total expected dividend payments from an investment, fund ...
  6. Gift Splitting

    A taxation rule that allows a married couple to split a gift's ...
Related Articles
  1. Retirement

    Top 7 Estate Planning Mistakes

    Many people try to avoid this process altogether, making things difficult for heirs.
  2. Taxes

    Tax-Efficient Wealth Transfer

    Taxpayers with large taxable estates were required to take steps to reduce them before 2011.
  3. Taxes

    Avoiding A Big Tax Bill On Real Estate Gains

    Installment sales allow sellers to defer taxes on real estate profits.
  4. Options & Futures

    Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  5. Options & Futures

    Need Retirement Income? Sell Your House!

    Discover 10 tips for making a quick sale and a healthy profit.
  6. Retirement

    5 Retirement Questions Everyone Must Answer

    Find out what information you need to guide your planning and achieve your goals.
  7. A new Supreme Court ruling has some financial advisors rushing to set up trusts to help protect inherited IRAs. Is that necessary?
    Investing Basics

    How Advisors Can Protect Inherited IRAs

    A new Supreme Court ruling has some financial advisors rushing to set up trusts to help protect inherited IRAs. Is that necessary?
  8. Retirement

    What's the difference between a financial advisor and a financial planner?

    Seeking professional advice from a financial advisor may involve asking for financial help from a certified financial planner, stockbroker or an accountant.
  9. Personal Finance

    Top 10 Money Mistakes New Parents Make

    Although having a child is an exciting and exhilarating experience, it is very easy to lose track of finance or make unwise decisions with money.
  10. Home & Auto

    Why Your Will Should Name Designated Beneficiaries

    Find out how to make the tough decisions when it comes to choosing who will receive your assets and how they will be paid out.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center