Gift Tax

AAA

DEFINITION of 'Gift Tax'

A federal tax applied to an individual giving anything of value to another person. For something to be considered a gift, the receiving party cannot pay the giver full value for the gift, but may pay an amount less than its full value. It is the giver of the gift who is required to pay the gift tax. The receiver of the gift may pay the gift tax, or a percentage of it, on the giver's behalf in the event that the giver has exceeded his/her annual personal gift tax deduction limit.

INVESTOPEDIA EXPLAINS 'Gift Tax'

The following are generally excluded from gift tax:

1. Gifts to one's spouse.
2. Gifts to a political organization for use by the political organization.
3. Gifts that are valued at less than the annual gift tax exclusion for a given year.
4. Medical and educational expenses - payments made by a donor to a person or organization such as a college, doctor or hospital.

As the regulations applied to gift taxes are very complicated, it is best to check with your respective tax authorities if you have given anyone a gift valued at more than $14,000 "on or after January 1, 2013 (including 2014 and 2015)," according to the IRS.

RELATED TERMS
  1. Dynasty Trust

    Long-term trusts created to pass wealth from generation to generation ...
  2. Qualified Personal Residence Trust ...

    A specific type of trust that allows its creator to remove a ...
  3. Generation-Skipping Transfer Tax ...

    A tax incurred when there is a transfer of property by gift or ...
  4. Unlimited Marital Deduction

    A provision in United States Federal Estate and Gift Tax Law ...
  5. Gift Tax Return

    A federal tax form that must be filled out by any individual ...
  6. Gift Causa Mortis

    A gift to be given at a later date in anticipation of the giver's ...
RELATED FAQS
  1. How are savings bonds taxed?

    According to Treasury Direct, interest from EE U.S. savings bonds is taxed at the federal level but not the state or local ... Read Full Answer >>
  2. My 80-year-old mother used her Roth IRA assets to make an $11,000 annual gift tax ...

    Under the current version of the law, any IRA or Roth IRA assets that are gifted while the IRA owner is alive are considered ... Read Full Answer >>
  3. What is a family Limited Liability Company (LLC)?

    A family limited liability company (LLC) is formed by family members to conduct business in a state that permits such form ... Read Full Answer >>
  4. How is maintenance of standard of living for survivors accomplished in estate planning?

    Estate planning is an integral component of comprehensive financial planning, as it allows individuals and couples to maintain ... Read Full Answer >>
  5. What is the difference between an intervivos trust and a testamentary trust?

    Estate planning offers tools to establish and maintain effective control over cash, investment and real estate assets during ... Read Full Answer >>
  6. What are the differences between a Chartered Financial Analyst (CFA) and a Certified ...

    The differences between a Chartered Financial Analyst (CFA) and a Certified Financial Planner (CFP) are many, but comes down ... Read Full Answer >>
Related Articles
  1. Personal Finance

    Pass On Wealth To Spread Holiday Cheer

    Find out why money can sometimes be the perfect gift.
  2. Retirement

    Gifting Your Retirement Assets To Charity

    There are several things to consider when it comes to this type of charitable giving. Make sure you're well informed.
  3. 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.
  4. Options & Futures

    8 Ways To Help Family Members In Financial Trouble

    Find out how to help the ones you love without hurting yourself.
  5. Retirement

    Saving Money With A Private Annuity Trust

    Learn about a strategy that could help you reduce taxes, diversify your portfolio and generate income.
  6. Professionals

    How to Best Navigate Taxes in Retirement

    Here's a rundown on tax strategies that can help extend the life of a nest egg.
  7. Personal Finance

    5 Signs You Need A Postnup

    They're not the most fun thing to contemplate, but these contracts can actually help a marriage.
  8. Entrepreneurship

    MLPs: How They Are Taxed

    The advantages of MLPs outweigh the disadvantages, especially if you play your cards right.
  9. Professionals

    5 Ways to Mess Up Estate Planning

    There are several ways to make an estate plan defective, most of which can be easily avoided by periodic plan reviews.
  10. Retirement

    How To Set Up A Trust Fund In The U.K.

    A guide to the whys and wherefores of setting up this most versatile of estate-planning instruments in the United Kingdom.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!