Did you know it’s actually the giver of the gift that is potentially subject to gift tax?–and not the recipient? It seems the opposite would be true (I mean, we’re all used to the government taking a cut of what we receive, right?). But if you give money OR property to someone as a gift, and that amount is greater than $14,000, you may need to file a gift tax return (even if the gift tax return is expected to show no tax due). This tax return is NOT the same as your annual income tax return, but has the same due date nonetheless.
This is only if your gift was greater than $14,000 in a calendar year, which is the annual exclusion amount for 2017 (this exclusion amount adjusts from time to time for inflation). This exclusion amount is per donee, and for a married couple, the combined exclusion amount is $28,000 ($14,000 x 2 people).
However, there are some exceptions for amounts that are given in excess of $14,000 ($28,000 if married) such as–
If the amount is given to a spouse or charity (children are NOT excluded)
If you paid someone’s medical expenses directly to the institution
If you paid tuition directly to the school
Remember that we’re speaking of gifts, and not transactions that involve receiving something in return (which would be considered in many cases as a trade or purchase). And of course you cannot deduct gifts on your income tax return, other than those contributed to a qualifying charitable organization.
If you have questions, or if you are giving money to a child or family member in order to help them purchase a home for example (which often happens) please contact us for advice on structuring this appropriately in order to be in compliance without the need for a gift tax return. You may reach us at E. Daniel Miller, CPA, PC at (888) 734-3933 or tax@edanielmillercpa.com.