Yearly Gift Tax Exemption Tracker Template

Take Advantage of the Annual Gift Tax Exemption

The IRS allows you to gift a certain amount each year to as many people as you wish, without incurring any gift taxes. This is known as the annual gift tax exclusion. Taking advantage of this exclusion can be a smart way to reduce the size of your taxable estate over time.

For 2023, the annual exclusion amount is $17,000 per recipient. If you're married, you and your spouse can each gift $17,000 to the same person, for a total of $34,000 per recipient per year. That can add up to a significant reduction in your estate.

To make the most of this tax benefit, it's important to track your gifting each year. Our Annual Gift Tax Exemption Tracker makes it easy. You can record recipients, amounts, and dates to ensure you're staying within the limits.

How the Annual Gift Tax Exclusion Works

The annual gift tax exclusion is applied per recipient, and resets each calendar year. This means you can gift up to $17,000 to each of your children, grandchildren, or anyone else you choose in 2023 without triggering gift taxes or having to file a gift tax return.

If you go over the $17,000 per person annual limit, you would need to file a gift tax return using IRS Form 709. However, this doesn't necessarily mean you'll owe gift taxes. Any amount gifted over the annual exclusion counts against your lifetime gift and estate tax exemption, which is $12.92 million per individual for 2023.

So, as long as your total lifetime gifting doesn't exceed $12.92 million, you likely won't owe any gift taxes. But you'll still need to file a gift tax return to report gifts over the annual exclusion amount. Our tracker template makes it simple to see if you're approaching the annual limits for any recipients.

Assets You Can Gift Under the Exclusion

The annual gift tax exclusion can apply to gifts of money, investments like stocks and bonds, and other property. This gives you options for what to gift depending on your financial situation and estate planning goals.

Some common assets people gift under the annual exclusion include:

• Cash
• Checks
• Stocks, bonds, mutual funds
• Portions of real estate through joint ownership
• Cars and other vehicles
• Jewelry, art, collectibles

Generally, any transfer where the recipient gains value and you get nothing or less than full value in return can be considered a gift. Our template lets you specify what was gifted along with the dollar value so you have detailed records.

Gifting to Reduce Your Taxable Estate

One of the main benefits of utilizing the annual gift tax exclusion is the ability to strategically reduce the size of your taxable estate over time. By consistently gifting assets to your intended heirs each year, you can move significant wealth out of your estate without incurring gift or estate taxes.

Here's an example. Let's say you and your spouse have two adult children and four grandchildren. By gifting the maximum $34,000 to each of those six recipients every year, you could move $204,000 out of your estate annually. Over a 10 year period, that's over $2 million transferred tax-free, greatly reducing the value of your taxable estate.

Of course, it's important to consider your own financial needs in any gifting strategy. You don't want to jeopardize your lifestyle or security by gifting too aggressively. But if you have the means, annual tax-free gifting can be a powerful estate reduction tool. Tracking your gifts ensures you're making the most of the exclusion each year.

No Limit on Number of Gift Recipients

A key feature of the annual gift tax exclusion is that it applies separately to each recipient. There's no limit on the number of people you can gift to in a year, as long as you stay under the $17,000 per person limit.

This means you could gift the maximum to 10, 20, or even 100 different recipients if you wanted to. The exclusion amount applies individually to each person. So if you have a large family or many intended heirs, you can spread your annual gifting out strategically among them.

You can also gift to non-family members like friends, employees, or anyone else you choose. The exclusion isn't limited based on your relationship. Our tracker template has space to record as many recipients as you need each year.

Recordkeeping for Tax-Free Annual Gifts

While you don't have to file a gift tax return for gifts under the $17,000 annual exclusion, it's still important to keep good records. This can help in case of any future questions from the IRS about your gifting.

For each gift, you should record:

• Recipient's name
• Date of the gift
• Description of the gift (cash, stocks, etc.)
• Value of the gift

You should keep copies of any supporting documentation as well, like bank statements, titles, or appraisals. Generally, it's recommended to keep gift records for at least 7 years after the gift is made.

Using a template like our Annual Gift Tax Exemption Tracker can help you organize all the key details in one place. That way you have a complete history of your tax-free gifting if ever needed.

Filing Gift Tax Returns

In any year that you gift more than the $17,000 annual exclusion to a single recipient, you're required to file a gift tax return using IRS Form 709. This informs the IRS that you've used up part of your lifetime gift and estate tax exemption.

Filing Form 709 doesn't necessarily mean you'll owe gift taxes though. It's mainly to keep track of how much of your $12.92 million lifetime exemption you've used so far. You'll only owe actual gift taxes once you've used up your entire lifetime exemption.

It's important to file Form 709 by the tax deadline (typically April 15) for any year you exceed the annual exclusion. You can file it separately or along with your income tax return. The form requires details on each gift over the exclusion amount, the recipient's info, and your remaining lifetime exemption.

Staying under the $17,000 annual exclusion per recipient helps you avoid this extra filing requirement. Tracking your gifts through the year lets you easily see if you're approaching the threshold for any recipients.

Maximizing the Annual Gift Tax Exemption

To get the most estate reduction benefit from the annual gift tax exemption, consider these strategies:

• Gift early in the year to remove assets from your estate sooner
• Use the full $17,000 per recipient where possible
• Coordinate with your spouse to double the exclusion to $34,000 per recipient
• Choose assets likely to appreciate in value for maximum growth outside your estate
• Create a trust to manage gifted assets for minor recipients
• Make direct medical and education payments, which don't count against the exclusion
• Consider leveraging the exemption for 529 plan contributions for college savings

The key is to be proactive and strategic with your annual gifting. The more you can move out of your estate through tax-free gifts, the lower your potential estate tax burden later. Tracking your gifting helps you spot opportunities to maximize the exclusion each year.

Wrapping It Up - Your Annual Gifting Plan

Incorporating the annual gift tax exclusion into your estate planning can help you transfer wealth to your loved ones tax-efficiently over time. But it requires some proactive strategizing and good record-keeping.

That's where our Annual Gift Tax Exemption Tracker comes in. This simple spreadsheet template makes it easy to:

• Record all your gifts in one place
• Track gifts to each recipient relative to the $17,000 annual exclusion
• Document key details like date, description, and value for each gift
• See how much you've gifted in total each year
• Identify any gifts that will require filing a gift tax return
• Spot opportunities to maximize your tax-free giving

Take control of your annual gifting and estate reduction plan. Download our free tracker template and start documenting your tax-exempt gifts today. With good records and a solid strategy, you can make the most of this valuable tax benefit for years to come.