What if no other exclusion applies?
Finally, even if none of the other provisions allows you to avoid gift tax, you have a lifetime exemption amount that will generally cover you. In 2021, that amount is $11.7 million.
Say you gave $15,000 each to nine friends in 2021 and $100,000 each to your spouse and your child. The nine gifts are all covered by the annual exclusion. For your spouse, the spousal exemption covers the entire amount. Only the child’s gift is subject to tax, with the first $15,000 tax-free and the remaining $85,000 uncovered.
However, you’re allowed to apply the $85,000 against your $11.7 million lifetime exemption amount. That would leave you $11,615,000 to use for future gifts or as your estate tax exemption at death.
The catch here, though, is that you have to file a gift-tax return on IRS Form 709 in order to claim the lifetime-exemption amount. With gifts subject to the annual, marital, charitable, educational, or medical exemptions, filing is rarely necessary.
Go ahead — make your gifts
Once you hear about the gift tax, it can be easy to think that it’ll be a nightmare. However, with so many exclusions, very few people have to deal with gift-tax liability at any point in their lifetime.