Information Station

A collection of wealth improvement articles


When are gift taxes due and who pays them?

Question: When are gift taxes due and who pays them?

Answer: Gift taxes are due on certain transfers of wealth. If and when gift taxes are due, the donor is liable for them. The recipient of the gift is not taxed. (Note that gifts to charity are not subject to gift taxes.)

The combined estate and gift exclusion for 2021 is $11.7million. In addition, from 2018-2021, you're entitled to make annual gifts up to $15,000 (the annual exclusion for 2022 is $16,000) to as many individuals as you like without incurring a gift tax. The tax law lets you give away more than this annual limit in certain cases. For example, you can generally make unlimited gifts to your spouse. You can also pay an unlimited amount of medical or tuition expenses for another person as long as your payments are made directly to the institution.

Gifts beyond the limits indicated are subject to tax at a maximum rate of 40%. If this occurs, ask for clarification on how this should be reported.