Understanding the Federal Gift Tax – Is Your Gift Taxable?

Is my gift taxable

If you plan on gifting money or property to someone, you should understand the Federal Gift Tax rules & requirements. Our tax experts are here to help you determine if your gift is taxable.

Gifting relatives, friends, or charities money or property is a great accomplishment for many people. It is, however, important to remember that some gifts may be taxable and require special filing forms when it comes time for tax preparation. We’ve pulled together 7 of the best tax tips for gifts & gift tax right from the IRS.

Need help determining if a gift you have given this year is taxable? Contact our Pittsburgh Tax Professionals and let our pros help! - (412) 931-161.

1 - Nontaxable Gift Category. While most gifts are considered taxable, there are a few exceptions to remember. Here are a few that fall into the “nontaxable gift” category:

  • Gifts that do not exceed the yearly annual exclusion
  • Tuition or medical expenses that was paid directly to a medical or educational institution for someone
  • Gifts to your spouse
  • Gifts to a political organization
  • Gifts to charities

2 - Annual Exclusion Amount is Important. If you are filing taxes for the year 2015, keep $14,000 in mind. That is the annual exclusion amount that determines if you will be subject to the federal gift tax. If you give a gift of property (i.e. car) or money to a friend or relative, the gift tax usually does not apply until the value of the gift exceeds the annual exclusion for the year.

3 - The Recipient Doesn’t Pay Taxes. In general, the person who is receiving your gift will not have to pay taxes on it. The person giving the gift of money is the one responsible for paying the federal gift tax.

4 - Gifts Are Not Deductible. Other than deductible donations to approved charities, you cannot deduct the value of the gift you give on your annual tax return.

5 - Forgiven Debt and Certain Loans May be Taxed. If you forgive a debt or provide a loan that is interest-free or below marketing interest rate, the amount may be subject to the gift tax.

6 - Gift-Splitting with Your Spouse. You and your spouse can give a gift up to $28,000 to a third party without making it a taxable gift. Each of you can claim one-half of the gift, meeting the $14,000 annual exclusion amount.

7 - Filing Requirement for Gift Tax. You must file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, if any of the following apply:

  • You gave gifts to at least one person that amount to more than the annual exclusion for the year which is currently $14,000.
  • You and your spouse are splitting a gift. This is true even if half of the split gift is less than the annual exclusion.
  • You gave someone a gift of a future interest that they can’t actually possess, but will receive income from later.
  • You gave your spouse an interest in property that will terminate due to a future event.

 

 

Additional IRS Resources:

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