In addition to the annual exclusion amounts, you also can give the following without triggering the gift tax:
- Charitable gifts.
- Gifts to a spouse.
- Gifts to a political organization for its use.
- Gifts of educational expenses. Unlimited as long as you make a direct payment to the educational institution for tuition only. Books, supplies and living expenses do not qualify.
- Gifts of medical expenses. Unlimited as long as they are paid directly to the medical facility.
Unified credit
In estate planning, you also must consider the unified credit. This is the credit for the portion of estate tax due on taxable estates. For 2006 through 2008, the unified credit for estate tax purposes is $780,800, which is the amount that eliminates tax liability for estates worth $2 million. The unified credit increases to $1,455,800 in 2009 for estate tax purposes, with the amount protected from the estate tax going to $3.5 million in 2009.You must subtract the unified credit from any gift tax you owe. Gift taxes don't kick in until after you have given away $1 million over your lifetime. This exclusion applies for tax years through 2009, with the estate tax scheduled to be repealed in 2010 for that year only. Any unified credit you use against your gift tax in one year reduces the amount of credit you can use against your gift tax in a later year.
The total amount used during life against your gift tax reduces the credit available to use against your estate tax.
Unified credit
|
| 2005 | $345,800 | $555,800 |
| 2006, 2007 and 2008 | $345,800 | $780,800 |
| 2009 | $345,800 | $1,455,800 |
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