Gift tax is a tax imposed on the transfer of property, money, or assets from one individual (the donor) to another (the donee) during the donor’s lifetime. The gift tax is separate from the estate tax, which applies to the transfer of property upon an individual’s death. The purpose of the gift tax is to prevent individuals from avoiding estate taxes by giving away their assets before they pass away.

Key points related to gift tax include:

1. **Annual Gift Tax Exclusion:**
– The IRS allows individuals to make a certain amount of tax-free gifts each year to each recipient. The current annual gift tax exclusion is $15,000 per person. This means an individual can give up to $15,000 to any number of individuals each year without incurring gift tax. For example, if you have three children, you could give each of them $15,000, for a total of $45,000, without triggering gift tax.

2. **Lifetime Gift Tax Exemption:**
– In addition to the annual exclusion, individuals have a lifetime gift tax exemption. This is the total amount of gifts an individual can give over their lifetime without paying gift tax. As of my last knowledge update, the lifetime gift tax exemption is quite substantial, but it is subject to change and should be checked with the latest IRS guidelines.

3. **Gifts Beyond the Exclusion:**
– If a donor gives more than the annual exclusion amount to a single individual in a calendar year, the excess is generally subject to gift tax. However, instead of immediately paying the tax, the excess gift amount reduces the donor’s lifetime gift tax exemption. Only when the lifetime exemption is exhausted will gift tax be due.

4. **Gifts to Spouses:**
– Gifts between spouses who are both U.S. citizens are generally not subject to gift tax. There is an unlimited marital deduction for such gifts, allowing spouses to give each other unlimited amounts without triggering gift tax.

5. **Gift Splitting for Married Couples:**
– Married couples can elect to “split” gifts, effectively combining their annual exclusions for gift tax purposes. This allows them to collectively give up to twice the annual exclusion amount to a single individual without incurring gift tax.

6. **Gift Tax Return (Form 709):**
– If a donor gives more than the annual exclusion amount to any individual or makes certain types of gifts, they must file a federal gift tax return (Form 709) with the IRS. The return is used to report the value of the gifts and calculate any gift tax owed.

7. **Educational and Medical Exclusions:**
– Gifts made directly to educational institutions for tuition or medical expenses paid directly to medical providers on behalf of someone else are not subject to gift tax. These exclusions are in addition to the annual gift tax exclusion.

8. **State Gift Taxes:**
– While the federal government imposes a gift tax, not all states have a state-level gift tax. State laws regarding gift taxes vary, and individuals should be aware of the rules in their specific state.

Gift tax laws can be complex, and they may change over time. Individuals considering making significant gifts or those with complex financial situations should consult with tax professionals or estate planning attorneys to ensure compliance with current tax regulations.