Keeping in mind the definition of a gift as defined above, nearly every gift is assumed to be a taxable disposition. But, there are some exceptions. Here are a few.
Gifts to a spouse
Gifts to your spouse are a type of present that is non-taxable for both parties. This allows the donor to know that all of the money they wish their spouse to receive will be theirs–not belonging to the government as well.
Gifts within annual deduction amounts
In the U.S., as long as your total amount of gifting falls under a certain amount, it is also considered to be tax-exempt. In 2022, the current amount that you can give without accruing tax is $16,000. In 2023 it will be increased to $17,000.
In the case of a joint gift, the amount is doubled per donor. For example, if you and your partner decide to give $32,000 jointly to a friend in need, both of your annual deduction amounts apply to the transaction. Thus you fall within the tax-exempt bracket.
If the amount you can give without triggering tax seems too small, there is an additional option if you plan to exceed it. Once you do so, you will need to report your gift to be deducted from your Lifetime Exclusion Amount–using Form 709. This amount is the sum of all the gifts you can give during your lifetime, without being taxed. In 2022 this amount is just over 12.06 million.
Keep in mind, however, that this amount also applies to your estate. If you access this amount with giving during your lifetime, it will reduce the amount your estate can be worth before triggering estate tax. Here’s an example to clear up any confusion:
Let’s say you choose to give your home (valued at one million dollars) to a family member that is not your spouse. If you pass away, and your estate is valued at 12.06 million, you will be taxed on the remaining 1.06 million that spills over that bracket.