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Is Your Gift Taxable?

Do you ever wonder if the federal gift tax applies to your specific gift giving? Keep in mind that gift givers—not gift recipients—are responsible for paying gift tax.

In 2016, unless the value of your gift exceeds $14,000, don’t worry about gift tax, though in some cases, gift tax returns must still be filed. Further, you won’t owe any gift tax until you’ve given away more than five million in cash or other assets during your lifetime.

The following types of gifts are exempt from the federal gift tax with no requirement necessary to file gift tax returns:

  • Gifts that don’t exceed the annual exclusion amount for the calendar year ($14,000 in 2016)
  • Tuition or medical expenses for another person, as long as you make the payments directly to the medical or educational institution
  • Gifts to your spouse (assuming he or she is a S. citizen)
  • Gifts to IRS-approved charities

Taxpayers will need to file Form 709, United States Gift Tax Return (https://www.irs.gov/pub/irs-pdf/i709.pdf), if any of the following apply:

  • You gave a gift exceeding the exclusion amount for the year
  • You and your spouse are splitting a gift, even if half of that gift is less than the annual exclusion amount
  • You gave a person a gift of a future interest that he or she can’t actually possess or enjoy, or from which he or she will receive income later
  • You gave your spouse an interest in property that will terminate due to a future event
  • You gave gifts totaling more than $148,000 during the year to your spouse who is not a U.S. citizen

Some other tax considerations include:

  • Gifts are not tax-deductible. Giving a gift doesn’t normally affect the taxpayer’s situation. Except for charitable donations, taxpayers may not deduct the value of the gifts they make.
  • Forgiven debt or certain loans could be considered gifts. Forgiving debt or making an interest-free loan may be subject to the gift tax.

In summary, even though the IRS may require you to file a gift tax return, unless you give gifts equaling a lot of money or property, you won’t need to worry about paying a federal gift tax.

For more information see Publication 559, Survivors, Executors, and Administrators. Taxpayers can view, download and print tax products on IRS.gov/forms at any time and view videos on Gift Tax (English | Spanish | ASL).

Of course the proven tax accounting firm of Patrick & Robinson CPAs can help, too. Contact us at Office@CPAsite.com or (904) 396-5400.

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