I once heard that if you were to give someone a large amount of money as a gift then the government....?

Question

Can and will tax the money? Is this true? And if so how much money does it have to be for the government to tax it and what percentage do they take? Thanks!

Answer 1

Sort of.

Gifts of more than $12,000 get reported by the giver on form 709. The amount over the $12,000 is considered a taxable gift.

You get to give $1Million in taxable gifts before you have to get out your checkbook. These gifts count against your estate when you die.

See IRS publication 950 for the general rules and the exceptions (like tuition checks written directly to the school). See IRS form 709 instructions if you want to see the tax rate, but realize it starts at 18% and quickly climbs.

Answer 2

True, but we're talking really large amounts. Any one person can give any other one person $12,000 a year without any tax consequences. And they get a lifetime exemption of a million dollars for gifts over that amount before any gift taxes are due, although gifts over $12K do have to be reported on a gift tax return.

So this really only affects people who are pretty rich, not ordinary people.

Answer 3

There is a gift tax, but most likely you won't have to pay anything at the time of the gift.

First, you can give up to $11,000 per person to an unlimited number of people each year without any tax consequences. This is indexed to inflation, so it's probably bigger this year. This is called the "annual exclusion."

For bigger gifts, the gift tax and the estate tax are tied together. You've probably heard that at your death, you have to pay federal estate tax if your net estate is over a certain value. This value is frequently changed by statue, but it's usually around $1 million. Well, any gifts you give in your lifetime count against this amount. Here's an example with simple numbers: if a person's net assets are worth $1.5 million, and they give a gift of $511,000, they would have a remaining lifetime deduction of $500,000 ($511k- annual exclusion = $500k used). If they never gave any more taxable gifts, their estate would be worth $1 million, but they would only have $500,000 in deductions remaining, so $500,000 of their estate would be taxable.

As you can tell this can be complex. Any gift over the annual exclusion can have effects at your death if your estate may be large enough to be taxed. There's no way to predict changes in the estate tax; smaller estates could be taxed in the future, or the tax could be eliminated altogether. There are also state gift and estate taxes to consider, and these vary considerably. If you're considering a large gift, I would encourage you to talk with a tax accountant in your state, they can probably save you a lot of money.

Answer 4

I dont recall the amount, but yes it can be taxed. "Gift tax" it is called. I believe it is in large amounts like $5000 or $10,000 or more. Here is a link...

Answer 5

Well, last time I looked the limit was $10,000.
The percentage they take depends on the income of the recipient most likely.

You need to contact the IRS either by phone or online to ask about what percent they take and what the rules are.

Answer 6

I've never heard of such a tax on gifted money.

Answer 7

They can tax it, unfortunately. Good luck!

Answer 8

thats new to me...