How much can I gift to my children annually without paying federal gift tax?
Generally, you may gift cash or other property not exceeding the value of $14,000 to any individual during the calendar year without being required to file a federal gift tax return. This amount is known as the annual exclusion amount.
The annual exclusion amount relates to your requirement to file a gift tax return, and not to your payment of gift tax.
The annual exclusion applies only to gifts where the recipient has the right, then and there, to take the gift and do with it what they wish.
If you made a gift into a trust, for example, and the beneficiary had to wait until age 30 to have an enforceable right to take it out of the trust, the annual exclusion does not apply.
If your calendar year gift to any individual exceeds the value of $14,000, you will be required to file a federal gift tax return. You will not be subject to gift tax, however, unless your total lifetime taxable gifts exceeds $5,490,000 for 2017.
Here's an example
If your gift to your child during a calendar year is, for example, $20,000 in cash, you will be required to file a gift tax return.
You will not pay any federal gift tax as the first $14,000 qualifies for the annual gift tax exclusion and the excess amount of $6,000, while a "taxable gift," will be offset by your lifetime exclusion of $5,490,000. Hence, there will be no gift tax due and you will have a remaining lifetime exclusion of $5,484,000 to offset against future gifts.
Please note that Connecticut has a gift tax. Connecticut allows for the $14,000 per person per year annual exclusion, but provides only a $2,000,000 lifetime exclusion.
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