Gift Tax

• When you give money to an individual, you do not get to take a tax deduction as you would if you gave the money to a charity. In fact, you might even have to worry about paying taxes on the amount of your gift. The gift tax is imposed on the giver and not on the person that receives the gift. This can apply to cash gifts as well as giving a piece of property, such as a car or real estate.
  
  

Annual Limit

• Although gifts to individuals are not tax-deductible, you may not have to pay taxes on them either. As of 2011, you can give up to $13,000 per year to an individual without having to worry about any possible tax liability. This exemption is available for an unlimited number of individuals. If you are married, you and your spouse can give another individual up to $26,000 per year without having to worry about any gift tax implications.
  
  

Lifetime Limit

• If you decide to give more than the $13,000 or $26,000 limit to a single person, then the overage applies to your lifetime gift limit. The lifetime giving limit is $1 million per person. Only the amount of the annual overage applies to this limit. For example, if you give someone $20,000, only $7,000 will go towards the limit. If you go over the $1 million limit in your lifetime, then you will have to pay taxes on every gift that you give over the $13,000 annual limit.
  
  

Gift Tax Return

• When you give more than the annual limit, you will have to report this to the Internal Revenue Service. This requires you to complete a basic gift tax return when you file your taxes for the year. The IRS will keep track of the total amount of gifts that you have given in your lifetime. Once you reach the lifetime maximum, they will start taxing you on the amount of money that you give as gifts.