A gift tax is a federal tax on the direct or indirect transfer of property, including money, from one living individual to another, while receiving less than full value or nothing at all in return. Most gifts are not subject to a gift tax.

You are allowed an annual exclusion from the gift tax for gifts to each of your donees. If you and your spouse jointly own the donated property, the annual exclusion is doubled. The amount of the gift to each donee that is excluded from the gift tax is adjusted annually. In addition, the following are generally not subject to a gift tax:

--    Gifts to your spouse

--    Tuition and medical expenses that you pay directly to an educational or medical institution for someone else

--    Gifts to political organizations for their own use

--    Gifts to qualifying charities

You can incur a gift tax even if you did not intend the transfer to be a gift. Arrangements such as interest-free or reduced-interest loans may be subject to a gift tax. Granting the use of a property or income from a property without receiving the full value in return may also incur gift tax. In addition, gifts of future interests, which cannot be possessed or used until sometime in the future, cannot be excluded from the gift tax.

The donor usually pays the gift tax, although under some circumstances the donee may agree to pay the tax. If you owe a gift tax, subtract the unified credit from the tax. This reduces the amount of unified credit available for offsetting your gift taxes in subsequent years. The total amount of unified credit used to offset gift taxes reduces the amount of credit for offsetting estate taxes after your death.