Annual Exclusion

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.

BREAKING DOWN '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.

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RELATED FAQS
  1. How does the gifting process work with a deed transfer?

    My parents own a home that they would like to "gift" to my husband and me. The house is in my parents name and ... Read Answer >>
  2. If a parent transferred a house deed to their three adult children, do they need ...

    Currently, only the parents Read Answer >>
  3. How can my husband inherit a house deed?

    My mother in law wants to know the best way to leave the deed to her house to her son (my husband). Should it be left in ... Read Answer >>
  4. Can I give stock as a gift?

    Stocks, bonds or any other securities can be transferred as gifts. Giving the gift of stock also has benefits for the giver. ... Read Answer >>
  5. Justin and Britney, multi-millionaires, want to make the maximum gift of cash to ...

    The correct answer is c. A donor of money and/or gifts may give up to $12,000 to as many different recipients as they desire ... Read Answer >>
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    I don't own a home, but I have the power of attorney for my grandmother who will be going into a nursing home. I've ... Read Answer >>
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