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Lifetime Gift Tax

In many countries, gifts do not attract any taxation. However there could be some outstanding circumstances that may lead to the taxation of gifts. Life time gift taxes is a term commonly used to refer to the amount of gifts that an individual is entitled to give out during his/her lifetime without being taxed. If the individual overshoots this margin in the value of gifts he has awarded then the surplus will start attracting taxation.

What is the value of gifts that can be given without tax in a lifetime?

In the U.S, the figure is marked at $1 million. This thus means that each individual is entitled to issue gifts totaling up to this amount without the gift being taxed. If the individual exceeds this amount then he/ she must start paying taxes on any more gifts awarded.

Does the gift attract taxation once the new owner has received it?

There are rules governing the taxation of gifts once they get to the gifted. If the gift given happens to be an income generator, then the income generated from the gift will have to be taxed at existing tax rates. There is also a limit to the amount in value of the gifts you can give to different people per year. As of 2008 the annual exclusion amount was $12,000 and in 2009, the figure was adjusted to $13,000.

How do you determine a gift item?

A gift is defined as an item or reward given to somebody absolutely with no strings attached. This is to say that you cannot classify any thing given to you as a result of some job you did or a service you rendered as a gift. It is also worth noting that gifts do not attract tax and therefore the recipient has no obligation to report them on their income tax returns. Although the gift you receive does not attract tax, if the gift helps you in making any revenue, then the revenue must be taxed accordingly

Under what circumstances will gifts attract tax?

As much as most gifts do not attract tax, the donor of the gift may nonetheless find himself paying taxes on the gift he/she gives out. This happens if the value of the gift exceeds the exclusion amount and he happens to give it to a single recipient within a single year. Other gifts such as those directed towards the payment of medical bills and educational funds will not be limited and will not be taxable if paid directly to the institutions. Any gifts awarded to your spouse have no limits and are not taxed although there is a limit set for spouses who are not U.S citizens.

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