what is the maximum federal gift tax, $11k or $12k?

Question

also what is the reporting procedure

Answer 1

You will hear $11,000, $12,000, and sometimes $10,000. The reason for this is it changed recently. As of 2005, it was $11,000, but for 2006, it became $12,000.

Now, what does that number mean? It means that any person can give anybody else up to $12,000 without having to file a Form 709 "Gift Tax". If you give more than $12,000 to someone, you must report the gift on the 709. Any amount over $12,000 is becomes part of your lifetime exemption. Once you have reached $1,000,000 of exemption over your life, you start to owe taxes on additional gift amount.

Example:

1) You give $12,000 to 1 million people...you owe no tax nor have to file any 709 forms.

2) You give $22,000 to 10 people per year for 20 years. Each year, you need to file the 709 and report the overage ($10,000 for 2006). For simplicity's sake, let's say that the $12,000 doesn't change. So, for 2006, you will report $10,000 x 10 or $100,000. You will no tax yet. For 2007, on your 709 you will again report $100,000 and owe no tax. This continues until the 11th year when the amount you report will cause a tax liability. Why? You will have exceeded your $1,000,000 lifetime exclusion.

One more thing, when you die, your estate is taxed. But, like gifts, your estate also has an exclusion. It is currently set at $2,000,000. That means the first $2,000,000 you leave behind upon your death, you will owe no tax. However, that $2,000,000 is reduced by the amount of lifetime gift exclusion you've taken to date. If you gave someone $412,000 in 2006 and that was the only gift you ever gave over $12,000, your gift exclusion is $400,000 which makes your estate exclusion only $1,600,000.

Hope this answers your question.

Answer 2

I believe it is $1,000,000.00 over your lifetime, but only $11,000 per person per year.