When you give gifts of property or money to people, you may need to pay a gift tax to the IRS. Here are some points to consider as you prepare to file your taxes this week.
Are all gifts taxable? Generally, no. While you should keep in mind that the gift tax could apply to you, most gifts that you give do not trigger the gift tax.
Here are nontaxable gifts:
- Gifts that are worth less than the annual exclusion amount for the applicable tax year.
- Tuition or medical payments you made on behalf of another person to an education system or medical facility.
- Gifts to your spouse.
- Gifts to political organizations.
- Gifts to charities.
What is the annual exclusion amount? The annual exclusion amount for 2016 is $14,000. You typically won’t have a gift tax for any gift you give another person that is under this amount.
Does the person who receives a gift pay a gift tax? Typically, no; they aren’t responsible for paying a tax on the gift.
If you gave a taxable gift, file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. Other details may apply, and you can find more information on the IRS website.
*This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax adviser.