This old adage may as well be attributed to a tax or estate attorney. Enter: the federal gift and estate tax exclusions. Under the Internal Revenue Code (the code), gifts made during lifetime are subject to a gift tax, however, various exclusions from the tax can provide opportunities to taxpayers to coordinate their estate planning to protect their wealth and better control how it is distributed. Read on to learn about the applicable lifetime and annual exclusion amounts for 2023, how things are expected to drastically change in 2026, and why you may want to consider larger gifts before 2026.

What Is the Gift Tax?

The federal gift tax is a transfer tax that imposes a tax on transfers of property made by gift. See 26 U.S.C. Section 2501. Generally, the person making the gift (the donor) is responsible for filing any necessary federal gift tax return (Form 709) and paying the gift tax, if any, rather than the recipient (donee). A “gift” is a transfer of property to another without consideration, meaning no cash or other monetary value is received in exchange.

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