Does a gift under the annual exclusion reduce my lifetime exemption?

Question

As things stand, I make gifts to several relatives during the year and want to understand how the annual federal exclusion works. As things stand, the gifts are not all on the same date and may include both cash and property. I am hoping to determine who reports which part.

Soradin · Accepted Answer

A qualifying present interest gift within the annual exclusion generally does not use the lifetime exemption. For the filing analysis, gifts above it are not automatically taxed, but they may require reporting and reduce the donor's remaining lifetime estate and gift tax exemption. For the filing analysis, the annual gift tax exclusion is a federal amount that can change over time. Keep the statements and other source documents that support the calculation, and use a tax professional to confirm the correct reporting party, form, basis, and due date before anything is filed.

Does a gift under the annual exclusion reduce my lifetime exemption?

Soradin

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