In 2010 the lifetime exemption from gift taxes was only $1,000,000 with a top tax rate of 35%, but under current law the lifetime exemption from gift taxes increased to $5,000,000 and the top tax rate remained at 35% for 2011 and the exemption increased to $5,120,000 in 2012 and the rate remained the same. In 2013, under the provisions of the American Taxpayer Relief Act, the exemption increased to $5,250,000 and the tax rate increased to 40%. In 2014 and future years, the exemption amount will continue to be indexed for inflation and the tax rate will remain at 40%. The 2014 lifetime gift tax exemption as indexed for inflation is $5,340,000.
To see how the lifetime exemption from gift taxes has changed over the years, refer to the following chart: Lifetime Exemption From Federal Gift Taxes: 1997 - 2014.
Two states currently assesses a gift tax at the state level - Connecticut and Minnesota (note that Minnesota's state gift tax went into effect on July 1, 2013). On the other hand, Louisiana abolished its gift tax effective July 1, 2008, North Carolina abolished its gift tax effective January 1, 2009, and Tennessee abolished its gift tax effective January 1, 2012.
In 2014 you can gift up to $14,000 per person, per year without incurring any federal gift tax. These gifts are referred to as "Annual Exclusion Gifts" and are not subject to the federal gift tax at all and therefore do not use any of the giftor's lifetime exemption from gift taxes. The annual exclusion amount is indexed for inflation but can only increase in $1,000 increments. Note that married couples can combine their annual exclusion gifts and gift up to $28,000 per person, per year, but "split gifts" must be reported to the IRS on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.
Gifts made to a spouse who is a U.S. citizen are entirely exempt from gift taxes due to the unlimited marital deduction, while gifts to a noncitizen spouse are exempt up to the first $145,000 in 2014.
The annual gift tax exclusion amount was first indexed for inflation beginning in 1997:Chart Showing Annual Exclusion From Gift Taxes: 1997 - 2014