How much can a one time cash gift be without either party owing taxes and are the banks required to report it?

Question

How much can you safely give or receive without owing any taxes and, can it be deposited in one lump sum without the banks alerting the IRS.

Answer 1

You don't pay taxes on gifts you receive.

People giving large gifts have to deal with a gift tax, but only if the amount given to a single individual during the year exceeds what the IRS calls a gift tax exclusion amount. This amount changes each year, but in 1996 it was $12,000.

In 1996, a generous individual could give any number of people up to $12,000 EACH without having to pay a gift tax. A generous individual's spouse could also give equal gift amounts to those same recipients (essentially doubling the gift), without having to pay a gift tax.

Generous givers can also give to a gift recipient's spouse, so in reality, one couple can give another couple up to $48,000 per year without concern about the gift tax.

In addition, gift giver's payments made directly to schools and hospitals for tuition and medical expenses are exempt from the gift tax rules.

There are certain rules for people giving away lots of stuff during their lifetime that will affect the Estate Tax when they die, but if your annual giving doesn't exceed the limits, then you (or your estate) won't have to worry about the Lifetime Exclusion amount.

Everyone (even car dealers) is required to report cash transactions over $10,000. If you make several cash deposits at a bank during a short period of time (up to a couple of weeks) that total $10,000, the bank will report that, also.

It's also a crime to split a cash transaction into multiple transactions to avoid the $10,000 reporting limit.

Banks are also required to submit a Suspicious Activity Report (SAR) on all suspicious transactions (which means anything out of the ordinary). Suspicious reporting begins at the $5,000 level.

For people receiving gifts, it is always a good idea to keep track of where money you deposit in a bank comes from. When you deposit those gift checks you receive, itemize them in your checkbook, like this:
- deposit - birthday money from grandma $10,000
- deposit - Christmas money from grandpa $10,000
- deposit - graduation gift from mom & dad $20,000

If you are ever audited by the IRS, you want to be able to show where this money you have that they didn't tax you for came from.

Answer 2

Banks report anything at $10,000 or over. However, one individual can give another individual up to $11,500 a year (may have changed to be higher now that it's 2007), without either paying taxes. Any amount over that incures a gift tax for the giver, IF they've given more than a certain amount in the recipient's lifetime, and I think it was something like $600,000! So, there probably won't be gift taxes.

BTW, a couple can give someone twice the amount, because there are two of them. So, parents could give a child $23,000, I think.

Answer 3

$9999 per year
Banks report interest, they don't report deposits, unless they suspect a crime.