Gift tax definition
/What is a Gift Tax?
The gift tax is a tax levied on anyone giving assets to another party without recompense. A sale of goods at less than their fair market value can be considered a gift, as can an interest-free or reduced-interest loan. Gifts to one's spouse, a political organization, and gifts below the annual gift tax exclusion are not subject to the gift tax. The gift tax exclusion is periodically reset to account for the effects of inflation.
Gift Taxes in Estate Planning
It makes sense for a high net worth individual to routinely issue gifts to other family members at regular intervals, as long as the amounts paid fall below the gift tax threshold. This disperses the gifting person’s estate prior to his or her death, so that less of the estate will be subject to estate taxes.