Did you know that if you give someone a gift in excess of $14,000 you may have to pay taxes on the amount over $14K? You may also have to file a gift tax return! This “gift tax” has been catching a lot of our clients off guard. Here are some things to know.
- What is considered a gift? Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.
- Are there any exceptions? The general rule is that any gift is a taxable gift, however, there are many exceptions. Generally, the following are not taxable gifts:
- Gifts that are not more than the annual exclusion for the calendar year.
- Tuition or medical expenses you pay for someone.
- Gifts to your spouse.
- Gifts to a political organization for its use.
- How many annual exclusions are available? The annual exclusion applies to gifts to each recipient. For example, if you give each of your three children a gift of $14,000 this year, the annual exclusion applies to each gift.
- Who pays the gift tax? The donor is generally responsible for paying the gift tax. Under special arrangements the recipient may agree to pay the tax instead.
If you are planning on making a gift or have any questions, contact us!