Is there any way to pay less taxes on a cash gift?

Question

When someone gives you a cash gift, lets say $20,000.. is there any way to pay less taxes on it? can you immediately invest it, or does the fact that they gave you the money count as taxable income immeditely? Also, why do i have to pay double social security tax? on Payroll I already make $63,000 and pay a ton of ssi tax...

well, last year i reported $20,000 as additional income and it wasnt like i did anything to get the money..i only have one job and i was lucky enough to 'fall into $20,000' so i ended up paying ss tax on the 63k on payroll and on the 20k on my taxes.

I know by the time im old enough to get ss it wont matter anyway.

What is considered a gift and what is considered income?

I didnt really do anything to get the money, i didnt get a 1099-misc, or anything or a w2 for it..

How do you know how to classify money?

Answer 1

If you reported a $20,000 gift as income, then you made a mistake on your tax return. Amend your return, since a gift is not taxable income.

Nor is a gift subject to self-employment taxes. If you reported the $20,000 as self-employment income, an amendment will refund those self-employment taxes (Social Security and Medicare) back to you.

If you invest the cash, then any money your investment earns is income. But not the initial investment of the gift.

Answer 2

You don't pay taxes on a cash gift that you receive. You don't show it on your tax return. It's not taxable.

If there is a gift tax return due, the giver would file that, and if any gift tax is due, the giver would be responsible to pay it.

Please elaborate on your question about paying double social security tax - it's not clear what you're asking. And by the way, it's ss tax - ssi is a totally different program, and nothing is deducted from your paycheck for it.

Answer 3

Any gift you receive is NOT taxable to you. You do not pay ANY tax on bona-fide gifts.

The person who gave you the gift may well have Gift Tax to pay, but you do not.

If you received a gift last year and reported it as income, file an amended return and get back the taxes on that money!

Answer 4

The grandmother pays the gift tax. She paid $88,000 too much. The limit is $12,000 per year per person. Why couldn't grandma paid $12,000 for 8 years then $4,000 in the ninth year? Then no one pays any additional taxes. The receiver does not claim the $100,000.

Answer 5

should you have someone you can share it with (wife, son etc.) you should have part of the cash given to them, however if you have it given to your children make sure its under 1700 or you will pay something called "kiddie tax" which can amount to a lot.

Another way to do so is to put the money into an IRA and pay small taxes on it then. And you can always take it out early (with a withdrawl penalty obviously) but it most likely will be less then the full taxes paid.