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How much money can a parent give a child each year without it being taxed?

Brainerd, MN |

My father passed away in January. My mother would like to know.

Attorney Answers 2


  1. The 2009 annual exclusion gift is $13,000 according to the IRS. It has increased from $12,000, which was the amount in 2008. The annual exclusion gift is the amount that you can give to any recipient of your choice during the calendar year without tax consequence. If the gift is a present interest and qualifies for the annual exclusion, it does not erode the exemption amount available upon death. As has been widely reported, the exemption amount in 2009 is $3.5 million.

    For example, in 2009, if husband and wife have two children, they can give $26,000 to each child. Upon their deaths, if they have done the appropriate planning, they could still leave $7 million to their children without any federal estate tax. (State estate tax may differ.) There generally is no reporting regarding the annual exclusion. However, there are exceptions depending on the type of gift and who is making the gift.

    Of course, I would suggest that yoru mother would be wise to talk with a local attorney that practices Elder Law and Estate Planning. There are always numerous things to consider. For example, you specifically asked about annual gifting from a tax perspective; however, the rules on gifts would be quite different if you are viewing them from a Medicaid perspective.

    I'm sorry for the loss of your father. It would possibly give your mother comfort in knowing that her estate documents were all "in order" to protect her and her family should something happen to her. A good attorney can be invaluable. Take a look at naela.org and find someone in your area. Best wishes to all.


  2. I want to add to the excellent answer already given. In addition to your annual gift exemption each individual has a $1 Million dollar lifetime exemption. Any amounts gifted over the annual gift exemption will reduce the lifetime exemption. After death the lifetime exemption used will reduce the estate tax exemption that can be used on death. For example. If I gave $513,000 to my child in 2009 and died years later with $200,000 left in my ownership I would owe zero taxes. There would be no gift tax due because I was under 1 Million in lifetime gift and upon my death the total given in my estate plus the gift taxes would likely be under the estate tax exemption (scheduled to be 1 Million in 2011 currently). Using your lifetime exemption can be very important in states like Minnesota where we have a State Estate Tax as well as a Federal Estate Tax.

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