What you need to know about the Federal Gift Tax

What is the gift tax? It is a federal tax on assets given away during the lifetime of a donor. The estate tax is a tax on assets transferred to heirs after the passing away of the owners. The annual gift tax exclusion enables gifting any number of people up to $15,000 each every year without the gift being taxable. In the case of married couples, the exclusions can be combined, and any number of people can be gifted $30,000 each per year. In case the spouse is a US citizen, the amount that can be gifted is unlimited. In case the spouse is a non-US citizen, gifts of up to $159,000. There is also a lifetime exclusion for federal estate & gift taxes in addition to the annual exclusion for gift tax. This is set at $11.7 million for the year 2021. This essentially implies that one can gift up to $11.7 million during or after his / her life without having to pay any federal gift tax or estate tax on the same. For married couples, this amount goes up to $23.4 million.