As the end of the year approaches, it may be prudent to consider making gifts and taking advantage of annual gift tax exclusions.
For 2015, an individual is permitted to gift $14,000 per recipient, without incurring any gift tax. Additionally, married individuals have the benefit of being able to split gifts, allowing them to gift $28,000 per recipient, tax free. An individual can of course gift more than the annual exclusion amount to a recipient, but doing so will entail the use of their federal estate and gift tax exemption ($5,430,000 for 2015).
Generally, gift tax returns do not need to be filed for taxpayers gifting less than the annual exclusion amount. However, to take advantage of the annual gift tax exclusion for 2015, gifts must be made by December 31, 2015.
The IRS has also recently released their annual inflation adjustments for 2016. For 2016, the annual gift tax exclusion remains $14,000, and the estate and gift tax exemption gets a modest increase to $5,450,000.
