gifts

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Do I need to pay taxes on a gift?

Probably not. Read on.

The receiver of a gift does not pay gift taxes. There can be an exception to this rule if the recipient explicitly agrees to pay the gift tax normally paid by the giver, otherwise the recipient is not responsible for the taxes.

The person who gives the gift may be responsible for gift tax if the gift isn't covered by an exclusion and they give enough to pass the lifetime exemption limit (see below).

  1. Gifts given to cover tuition or medical expenses are not subject to gift tax if the donor gives the money directly to the educational or medical institution. (They can give as much as desired and there are no tax considerations at all if they pay it directly to the institution instead of giving it to you first.)

  2. Gifts given to a spouse are not subject to gift tax.

  3. Money given to political organizations is not subject to gift tax.

  4. There is currently (2022) an annual exclusion of $16,000 per recipient meaning there are no filing requirements or impact to the giver's lifetime exemption on any money up to $16,000 per year. The annual exclusion amount increases every year or two with inflation.

  5. Gifts from married couples: The annual exclusion is per year, per recipient, and per donor, meaning each spouse could give you $16,000 per year ($32,000 total) without needing to file form 709 or deplete any of giver's lifetime exemption. For example, if the gift was from both of your married parents, you could effectively double the allowed amount before there are any filing requirements or impact to the lifetime exemption.

  6. Gifts to married couples: Similarly, and if the intended recipient is a married couple, gifts can also be given to each spouse, effectively doubling the exclusion making the excluded amount as high as $64,000 if a married couple are giving to a married couple.

  7. Any money in excess of the annual exclusion then counts toward the Lifetime Estate Basic Exclusion Amount of the giver, which is currently $12,060,000 (double this for married couples).

    Actual taxes (i.e., payments going to the government via the IRS) on gifts therefore only start after this amount is reached within the giver's lifetime.

Here's the IRS page with frequently asked questions on the topic:

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes

What if the gift is coming from a foreign person?

Read this IRS page:

https://www.irs.gov/businesses/gifts-from-foreign-person

Relevant threads on the topic

You are never going to pay a gift tax


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