Now that Halloween is over, retailers will be setting up their holiday displays in force. The holiday season makes us think of giving gifts a little more than at other times in the year. Just in case you have a rich parent, aunt, or grandparent that wants to be very generous in their giving (or you are one), here are some things to keep in mind about gifts & potential gift taxes.
- Any gift taxes levied on gifts are paid by the giver (donor), not the one receiving the gift.
- The definition of gift for IRS purposes is “any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.”
- Gifts can be cash, goods (cars, etc), stocks/investments, really anything with value.
- If you give a gift in 2016 or 2017 with a value of $14,000 or less to an individual, no need to worry about gift taxes. A husband and wife can combine this amount to give $28,000 to an individual tax free.
- Gifts made directly to educational institutions for tuition/educational expenses or medical facilities for medical expenses on behalf of someone do not count as taxable gifts. Just make sure the money goes directly to the institution and not to the individual to pay the institution.
- If your gift is greater than the $14,000/$28,000 gift tax exclusion, please consult a tax professional about the potential tax liability.
Have fun gift-giving (receiving)!