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Gift Tax Questions (From Internal Revenue Service – USDOT Website)

Q: What is considered a gift?

Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.

Q: What can be excluded from gifts?

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.

1. Gifts that are not more than the annual exclusion for the calendar year.
2. Tuition or medical expenses you pay for someone (the educational and medical exclusions).
3. Gifts to your spouse.
4. Gifts to a political organization for its use.

In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.

Q: May I deduct gifts on my income tax return?

Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions). If you are not sure whether the gift tax or the estate tax applies to your situation, refer to Publication 950, Introduction to Estate and Gift Taxes.

Q: How many annual exclusions are available?

The annual exclusion applies to gifts to each donee. In other words, if you give $11,000 in 2002, 2003, 2004 or 2005 and $12,000 in 2006 or 2007, the annual exclusion applies to each gift.

Q: What if my spouse and I want to give away property that we own together?

You are each entitled to the annual exclusion amount on the gift. Together, you can give $22,000 to each donee (2002-2005) or  $24,000 (2006-2007).

IRS Contact Information-

Many general gift tax questions can be answered by calling the Internal Revenue Service at 1-800-829-1040.

You may also find answers to your questions by visiting Forms and Publications.

Click Here To See IRS Publication 950, Introduction to Estate and Gift Taxes