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Using the annual gift limit can effectively transfer wealth to friends and family tax-free. However, many fear that exceeding this limit incurs a tax liability, which falls on the gifter, not the recipient. This video explains that the gift limit is often misunderstood, and certain exemptions allow for gifting more than one might assume without tax implications. The IRS defines a gift as any transfer to an individual where no consideration is received, whether cash or assets. This means that if you gift without receiving something in return, it qualifies as a gift under IRS guidelines. The tutorial aims to clarify how to utilize these exemptions effectively.
