Will my daughter have to pay taxes on this?

Question

If I pay off my daughter's bills ,including her vehicles, will she have to claim it as income and pay taxes on it? The total would be forty thousand.

She is not a dependent, I live with her and her husband.

Answer 1

Your daughter will not pay taxes on it (the gift tax is paid by the donor, not the donee) and, unless you have made substantial other gifts in your lifetime, neither will you. You WILL need to file a Form 709 gift tax return, but your lifetime unified credit will offset the gift amount that goes over the annual exclusion ($12,000/person in 2006). To use the least amount of your unified credit give your daughter $12,000 and her husband $12,000. That way you only have a $16,000 "taxable gift" to report on the 709. The gift tax that will be computed on this amount will be $3,000, you will then use $3,000 of the $345,800 lifetime unifed credit available to you to make your 2006 tax liability for the gift $0.

If you have questions about this structuring please post them and we can answer.

Answer 2

Will you be my mom? Just kidding. You can pay off the daughters bills without her being liable for taxes if you have claimed her as a dependent. Is she in college? Even if she isn't she may still qualify as a dependent. If you give over a certain amount the gift tax applies and it's actually YOU that pays the tax on the money you've gifted. Go to http://www.irs.gov

Answer 3

I believe the answer is yes. I think there is a maximum of $10,000 (or it may be $11 or $12 thousand) that one person, including a parent, can give to another person with no tax implications, but anything above that the recipient would need to pay tax on.

Now, as for how in the heck the government would know that you gave your daughter $40K rather than $10K I have no clue. I don't know how this policy is actually enforceable, but hopefully someone else answering knows more about this and can explain it better.

Answer 4

For tax year 2006,

An individual can give up to $12,000 free of gift taxes to any other individual. This means that a Dad & Mom, for instance, can give a child a max of $24,000 without being subject to gift taxes. This is an annual limit, you can do it all over again next year.

So, a suggestion is to pay off $24K this year, and pay off the balance of $16K next year. That way, you avoid any problems.

Bear in mind that the tax obligation rests on the giver(s), not the receipient.

Paying off a kid's loans, or even forgiving a documented loan, is considered as a gift.

Answer 5

This would most likely be qualify as a gift. Your daughter would not be taxed. You can give your daughter and son-in-law $11,000 each once a year without incurring 'Gift Tax'. If you give, more in one year, you are required to fill a gift tax return. I'm not clear if you will actually owe any gift taxes.

You could Give them half the amount and loan them the other half now. Then, next year give them the balance of the loan.

Answer 6

I'm a tax professional with a reputable firm. The answer is that no, she would not have to claim the gift as income. HOWEVER, please be cautious, as you could get stuck having to file a Gift Tax return. Yup, YOU could be the one to be taxed. So, get with a reputable professional (with several years of experience), and go over your income and other financial information so you know exactly how it will effect you. H&R Block will go over the info for free in most cases - you only pay if you actually file with them.

Answer 7

One big question, are some medical bills? If so, you can pay directly to the doctor, hospital, or whatever and could possibly take a medical deduction on your return. (If you itemize and meet the income threshold amount).

Answer 8

I would suggest, instead of paying off at once, do it over a period 6 months or so. If the individual transaction is less than 10,000, nobody will report to IRS.

Answer 9

can you adopt me and pay my bills too?

Answer 10

http://cagle.com/news/Taxes2005/main.asp