Gift More Tax-Free in 2013

I hope Kanye West’s accountants are keeping track of his gifts this year.  With one reported gift of Cartier bracelets worth $65,000 to Kim Kardashian, Kanye has already exceeded the gift limit for 2013.$65000-gift-from-kanye-west/

For 2013, individuals are allowed to give $14,000 (or $28,000 for married couples) to any person and to as many people as they want without any gift tax consequences.  This exemption increased from $13,000 in 2012.  Gifts are not considered taxable until a gift to one person exceeds this annual exclusion, requiring a gift tax return to be filed.

Whether or not Kanye would actually have to pay gift tax on this gift depends on his prior gifting history.  For 2013, the lifetime gift tax exclusion is $5.25 million.  If Kanye has had taxable gifts exceeding this amount over his lifetime, he would be subject to a gift tax with a top rate of 40% on all taxable gifts.

If Congress had not passed the fiscal cliff legislation, big spenders like Kanye could have been paying a lot more in gift tax.  The lifetime exclusion was set to revert to $1 million with a top rate of 55%.

If/when Kanye and Kim get married, Kanye can gift freely to Kim without worrying about paying gift tax.  Spouses can enjoy an unlimited amount of exclusion for gifts to one another, unless the spouse is a non-U.S. citizen.  Annual gifts to a noncitizen spouse are limited to $143,000 for 2013.

With $65,000 of gifts in January alone, I’m interested to see what the Valentine’s Day gift will be.