Gift Taxes are taxes that supplement the Estate Tax. A lot of tax payers have questions about this type of taxes. Basically, gift Taxes are placed on gifts given away to any person while you are still living.
The Economic Growth and Tax Relief Reconciliation Act of 2001 did not eliminate the gift tax. Instead, the law retained the $10,000 per year per donee exemption, although the amount is indexed annually (starting in January 2009 it was raised to $13,000).
You may give cash or assets to an unlimited number of people each year without incurring Gift Tax liability -- so long as there are no strings attached. Married couples can give, as a couple, a $26,000 per year to as many people as they want. If you give more than the limit annually, the excess is applied toward your lifetime gift-tax exclusion. If at any point the gifts you gave during your life or left in your estate exceed that exclusion, you pay gift tax on the excess amounts over $1,000,000. As you might have guessed, any gift transferred between spouses (where both are US citizens) of any size is 100 percent Gift Tax-Free.
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts: gifts that are not more than the annual exclusion for the calendar year, tuition or medical expenses you pay for someone, gifts to your spouse, and gifts to a political organization for its use. Gifts to qualifying charities are deductible from the value of the gifts made.
In reality, the payment of Gift Taxes is relatively rare, thanks to the annual exclusion and the unlimited marital and charitable deduction. But, if the transfer is large or complicated or both, then it is a good idea to discuss the matter with several attorneys and CPAs or EAs. Ask about how much experience they have had and ask for referrals. Locate other individuals that have had similar experiences and ask for recommendations. Finally, after the individual or individuals are employed and begin to work on transfer matters, make sure the lines of communication remain open so that there are no surprises.