The annual exclusion eliminates relatively small transfers of present interests in property.

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The annual exclusion allows individuals to make gifts of up to a certain amount each year without being subject to gift tax. This amount is typically adjusted for inflation and is currently $15,000 per recipient per year. The exclusion only applies to transfers of present interests in property, meaning that the recipient has the immediate right to use, enjoy, and possess the property. The exclusion is designed to eliminate paperwork and administrative burdens associated with small gifts, so larger transfers or transfers of future interests are not covered by the annual exclusion.

The Annual Exclusion Eliminates Relatively Small Transfers of Present Interests