It is better to give than to receive. But if you give a gift above a certain amount, you might end up owing money to the Internal Revenue Service (IRS).

The federal tax code has very specific rules about how much you are allowed to transfer to others each year—and over the course of your lifetime—in the form of a gift. Any gifts above that amount may be subject to gift tax, which is paid by the giver. However, not every gift is subject to gift tax. There are annual exclusion amounts, a lifetime exemption amount, and other exclusions, such as education or medical exclusions, that relieve a giver of paying federal gift taxes. Because the lifetime exemption amount is very generous at this time, many people will not actually owe taxes on their gifts. However, high net worth individuals should be mindful of how gifting can affect the estate tax that may be due upon their death.