Gift exclusion is $13,000 in 2009

Each year you can make tax free gifts to whomever you choose so long as you limit your gifts to the annual gift exclusion amount. This year's gift exclusion amount is $13,000. If you give more than this amount to any one person, then you must pay federal tax on your gift. If you are so inclined, you can give $13,000 per person to just about anybody you choose. If you decide to give more than $13,000 to one person, consult your attorney or accountant to ensure that you file the correct forms with the IRS.



For most of us the question isn't how much to give but why give anything? The tax reason people make substantial gifts while they are alive is to reduce the value of their estate after they have died. Estates greater than $1,000,000 are subject to a 16% Maryland estate tax and estates greater than $3,500,000 are subject to both a 16% Maryland estate tax and an even more substantial 45% Federal estate tax. If you have gifted money while you are alive, your estate can be reduced tax free and the gift can reduce or even eliminate the exposure to estate taxes after your death.