You can give your kids $13,000 a year each without having to report anything to the IRS. Both parents could give $13,000 to a child ($26,000 total) without incurring a gift tax, but you have to file Form 709 with the IRS. However, there is also a lifetime gift exclusion of $1 million, so you can give more than $13,000 a year if you want to, but you have to file the 709 form with the IRS and keep track of how much the gifts add up to. After $1 million, the gift tax can be anywhere between 18% and 45% depending on income.
$13,000.00 per year per parent. If you are married, you and your spouse can give a total of $26,000.00 per adult child (can also give to spouse of adult child). I believe that if the spouse is deceased, then the surviving parent can still gift $26,000.00 per beneficiary but you should probably double check with a financial advisor on that.
2 years ago
Last edited at 10:00PM on 10/18/2011
Actually, there are two correct answers. You can gift any amount to your child free from income tax. Millions or billions! However, there is also a tax known as the Unified Gift and Estate Tax, which is a tax assessed on a person's estate at death. Many wealthy people would rather give two dollars to their kids than one dollar to the government, so Congress decided to tax gifts during life at basically the same rate as the estate after death. They realized, however, that parents would want to give kids Christmas and Birthday gifts and the IRS simply could not keep track of millions of tax returns reporting a fifty dollar baseball glove, so they allowed an annual exclusion amount. Originally it was ten thousand per giver per recipient per year. It is currently thirteen thousand.