Current Gift Tax Rate
The gift tax rate is a flat 40% on taxable gifts that exceed your lifetime exemption of $15,000,000. Because the lifetime exemption is so high, very few people ever actually pay gift tax. The tax applies only after you have exhausted your entire lifetime exemption.
How Gift Tax Is Calculated
Gift tax is calculated on a cumulative basis. Each year, you add your current year's taxable gifts to all prior years' taxable gifts, compute the tentative tax on the total, subtract the tentative tax on prior gifts, and then apply the unified credit. This ensures a progressive calculation even though the rate is effectively flat at 40%.
Who Actually Pays Gift Tax?
In practice, very few Americans pay gift tax. According to IRS statistics, fewer than 1% of Form 709 filers actually owe gift tax. The vast majority of filers are simply reporting gifts that exceed the annual exclusion and tracking their use of the lifetime exemption.