Gift Tax
Tax on the transfer of assets as gifts above annual exclusion limits.
The federal gift tax applies when you transfer assets to someone without receiving full value in return. The annual exclusion ($18,000 per recipient in 2024) lets you give up to that amount without reporting. Gifts above the exclusion count against your lifetime estate and gift tax exemption. Business owners often use gifting strategies for succession planning.
Example
A business owner gifts $50,000 worth of company shares to her daughter—$18,000 is excluded, and the remaining $32,000 reduces her lifetime exemption, with no immediate tax due.
Why It Matters for Your Business
Strategic gifting can transfer business ownership to the next generation while minimizing estate taxes, but exceeding limits without planning creates unnecessary tax exposure.
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
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