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Gift Tax: Do I have to pay gift tax when someone gives me money?

Gift Tax: Do I have to pay gift tax when someone gives me money? - TaxAct Blog

Updated for Tax Year 2015

Surprise – Mom and Dad gave you a nice check! Maybe it’s enough for dinner, or maybe it’s more of an “early inheritance.”

Either way, do you need to worry about paying tax on your gift?

Annual limits before the IRS takes notice

First, a gift must be quite substantial before the IRS takes notice.

A gift of $14,000 or less in a calendar year (2015 and 2016) doesn’t even count.

If a couple makes a gift from joint property, the IRS considers the gift to be given half from each. Mom and Dad can give $28,000 with no worries.

A couple can also give an additional gift of up to $14,000 to each son-in-law or daughter-in-law.

The effective annual limit from one couple to another couple, therefore, is $56,000 ($14,000 X 4 = $56,000).

Gift Tax: Do I have to pay gift tax when someone gives me money? - TaxAct Blog

Gifts that don’t count

Some transfers of money are never considered to be gifts, no matter the amount.

For purposes of the gift tax, it’s not a gift if:

  • It’s given to a husband or wife who is a U.S. citizen. Special rules apply to spouses who are not U.S. citizens.
  • It’s paid directly to an educational or medical institution for someone’s medical bills or tuition expenses. (It doesn’t have to be a child, or even a relative, for this exception.)

Gift tax is not an issue for most people

The person who makes the gift files the gift tax return, if necessary, and pays any tax.

If someone gives you more than the annual gift tax exclusion amount ($14,000 in 2015 and 2016), the giver must file a gift tax return. That still doesn’t mean they owe gift tax.

For example, say someone gives you $20,000 in one year, and you and the giver are both single. The giver must file a gift tax return, showing an excess gift of $6,000 ($20,000 – $14,000 exclusion = $6,000).

Each year, the amount a person gives other people over the annual exclusion accumulates until it reaches the lifetime gift tax exclusion.

Currently, a taxpayer does not pay gift tax until they have given away over $5.43 million in their lifetime (2015).

Does the gift recipient ever have to pay gift tax?

If the donor does not pay the tax, the IRS may collect it from you.

However, most donors who can afford to make gifts large enough to be subject to gift taxes can also afford to pay the tax on the gifts.

TaxAct makes preparing and filing your taxes quick, easy and affordable so you get your maximum refund. It’s the best deal in tax. Start free now or sign into your TaxAct Account.
About Sally Herigstad

Sally Herigstad is a certified public accountant and personal finance columnist and author of Help! I Can't Pay My Bills, Surviving a Financial Crisis (St. Martin's Griffin). She writes regularly at CreditCards.com, Bankrate.com, Interest.com, RedPlum, and MSN Money. She is an experienced speaker and a member of Toastmasters International. Follow Sally on Twitter.

Comments

  1. are disability payments from the VA taxable. if so is it considered odinary income.

    • Disability benefits from the VA are not taxable income, meaning you do not have to pay income taxes on it or report the gross income on your tax return.

  2. If I receive $14,000 from 5 individuals this year, do I have to pay any taxes? Basically, my question is, can I (the recipient) ONLY receive a max of $14k per calendar year?…or is my tax liability on TOTAL donations to me? I can’t find this question/answer anywhere on the web. Thanks!

    • No matter how many people gift you $14,000 in one year, you are not liable for any taxes on the money. The $14,000 annual gift tax exclusion amount only applies to the donor. As long as they stay at $14,000 or below, they will not have to pay any taxes or complete a Gift Tax return.

  3. Laila Barr says:

    My daughter and her husband need $40,000 for house expenses. I would like to give them each 14,000 as a gift toward this. They have two young children. Is it possible to give one or each of them the remaining $12,000 as a gift? If so, do I have to transfer to their account three separate checks, or is one check for the total amount OK?

    • You are able to give up to $14,000 to any one individual in one year without being subject to tax. This means you can give your daughter, her husband and any children up to $14,000 as a gift and avoid paying taxes. The amounts will need to be paid out separately to each person.

  4. My Father is selling his home and will give his 4 adult children the proceeds which will probably be around $50,000 each. Will each child have to pay taxes on that amount?
    Thank You.

    • As long as your father is gifting the money to each of his children, the children will not have to pay taxes on the amount received. Your father will need to file a gift tax return, however, the next time he files his taxes.

  5. My husband and I received money from many friends through a “go fund me” site. Do we have to pay tax on that money?

    • Generally, GoFundMe accounts are considered “personal gifts” which are not typically taxes as income in the US. This means you do not have to pay taxes on the amount you received. However, being that everyone’s situation is different and tax rules are always subject to change, we recommend keeping adequate records of any donations received.

  6. Hi. My Mom will have more than the $14k gift exclusion amount from splitting the sale of her late husband’s house with his daughter and grandchildren. She was not on the deed to the house or connected financially in any way. She wants to give this money to me, or rather, it will be deposited into my bank account, which she is the second name on. What, if anything, does either of us have to do for tax purposes? She also is retired, and doesn’t have enough income to even pay taxes anymore, but I’m not that lucky!
    Thank you!!

    • If you are receiving this money as a gift, you will not have to pay any taxes on the amount. However, your mom will need to file a gift tax return the next time she files.

  7. My aunty loan me 20,900 dollars for me to buy a car at no interest rate. I will pay her in monthly payments for 5 years. Will she has to declare taxes? So do I?

    • No she does not have to pay taxes on the amount you pay her since she is not collecting any interest. If she was charging you interest, she would have to report the interest amount she receives. You also do not have to pay taxes on the money since you are paying back a loan.

  8. If my grandfather is a US citizen but does not file taxes. Can he give me 1 million dollar gift?

  9. Hi
    My parents live outside of U.S.
    They want to give me 5,000 every months.
    Should i file a tax for this money?
    Tnx

  10. I have a friend who owes 45,000$, can he send multiple checks that are under 14,000$ to bypass paying the tax?

  11. If I sell my house for $200,000 but only want $150,000 for myself, how does it affect my taxes if I want gift the remaining $50000 to the buyer ???

    • You will need to complete a gift tax return the next time you file your taxes for the amount you gave to the buyer.

  12. Staci Tomlinson says:

    My hospital recently chose to close it doors, we were told we would be getting paid for the next 60 days in accordance to the federal WARN act. On these pay checks we have noticed that our federal tax withholding has nearly quadrupled, and the payroll dept says this is because it’s being treated like a gift tax-is that right???

    • Due to the complexity of your question and a variety of unknown details, we cannot provide an answer at this time. We suggest working directly with your employer’s payroll department for immediate answers.

  13. Julie Harmon says:

    I am purchasing my mother’s home and she is “gifting” me $28,000 in equity. She is 74 years old and her only income is social security, so she has not filed taxes in years. Since she does not file and will not be completing Form 709 for gift tax, do I need to claim as income on my taxes as the recipient?

  14. Melody Cook says:

    My dad passed away in July 2016. He had
    $381,000 in his checking account POD to me the daughter. I gave my brother a $152,000 cashier’s check. Did I incurr a gift myself? I will need to file a gift tax return right? When do I do that? By next April?

    • You are not subject to any taxes on the amount you received from your dad’s account. However, you will need to complete a gift tax return for the money given to your brother, but will only have to pay taxes on that amount if you’ve given over 5 million in your lifetime. Gift tax returns are due April 15 in 2017.

  15. A relative wants to give us 50,000 to put down on our mortgage. If they wrote the check out directly to the bank would we or they have to pay taxes on it?

    • If this money was gifted to you for the down payment on your mortgage, you would not owe any taxes. However, the donor would need to file a gift tax return and potentially pay taxes on the amount.

  16. If my mother wanted to give me and my wife 80,000.00 total and my brother and his wife 80,000.00 total all in one year, would she have to pay a gift tax?

    • In this situation, your mom would have to report that money on a gift tax return when she goes to file her taxes. Any time someone gives someone else more than $14,000, the donor has to complete a gift tax return. The good news is your mom will more than likely not have to pay any taxes on the amount until she’s given away $5.43 million in cash or assets over the course of her lifetime. If she gives a total of $160,000 away to your two families, that amount will count toward that lifetime total.

  17. A friend is loaning my wife and I $35,000, which we will begin paying back in 2 months. It is a loan, not a gift. Do we need to tell the bank this, or is it enough for us to have our agreement in writing to avoid him having to pay a gift tax?

  18. Fortune Tell says:

    If my father gives me $14000, my mom gives me $14000, my brother gives me $14000 my grandma gives me $14000, my grandpa gives me $14000 and my wife gives $14000 all in the same year do I have to pay taxes?

  19. I was given $8000 to go towards my expenses for a 3 month Missions trip out of the country. Do I need to pay taxes on the $8000 that I got through gifts from different people?

    • As long the donors didn’t receive anything in return for their donation, the money you received is considered a gift and is not subject to tax.

  20. I have student loans totaling $90,000. If an individual or institution was willing to pay off that total in one lump sum, what are the tax responsibilities of both parties? I am no longer in school and have been making monthly payments myself. Thank you.

    • Due to the complexity of this question, it sounds like there are three different scenarios at play. Number one, if an individual gifts you the $90k to pay off your loan, you will not be liable for any gift tax, however the donor will need to file a gift tax return. Number two, if an individual gives you a loan to pay off the amount, there are no tax implications for you. Number three, if an employer offers to pay the amount for you, they will report that as taxable income on your Form W-2 in which case you would have to pay taxes on the amount.

  21. Hi my son paid me 12,000 for money I lent him 8 years ago. I got a cashiers check at my bank for the full amount. I have it in a safe place but do I need to report it to IRS? My bank said they have to send the cash I brought to the bank to another department in the bank..to see if its drug money. I have done nothing wrong for them to do that. It was just cash my son paid me back for. Can you give me insight on this?

    • Sally Herigstad says:

      The repayment of a loan is not a gift. You don’t need to report it to the IRS, and it has nothing to do with the bank’s issues with large sums of money.

      I hope the bank has resolved their issues by now.

    • It sounds like you gave your son an interest free loan and he’s paid you back. In this case, the money is not taxable.

  22. My mom and dad started each of my children a UTMA account when they were born. They have both graduated from college and my mom and dad want to give them the money to use on their school loans. Because the accounts were set up in the children’s name as a UTMA account, wouldn’t that money be considered their money and not a gift from their grandparents. The accounts are over 14,000 each

    • Once your children reached adulthood, which is age 18 or 21 depending on the state, the control of the account was completely transferred to them. And, being that UTMA accounts have no stipulations on expenditures, your children can use that money in any way they want. However, it’s important to know the money used from the UTMA account will be subject to income taxes.

  23. I have an uncle who is on California medicare and medi-cal. He is in an assistant living care home. He just sold his house. Can he git
    14,000 each to his grandchildren? Why’ll being on medi-cal?

    • Your uncle can gift $14k to each of his grandchildren and it will not be subject to a gift tax. However, any questions regarding stipulations with his Medi-Cal coverage need to be directed to Medi-Cal.

  24. My mother and sister are moving in with me and my husband and each wants to gift us $20,000 to help with the down payment on a house large enough for all of us. Can they both split their gift and give me $10,000 and gift my husband with $10,000 and avoid having to file a gift tax return?

    • As long as your mom and sister’s monetary gifts do not exceed the $14,000 annual exclusion amount given to one person in a year, they will not be subject to a gift tax for tax year 2016. However, the annual exclusion amount does rise periodically, so be sure to double check the amount each tax year.

  25. My mom is giving me or donating her house to me. We will be transferring the title on my name soon. Do I have to put this on my taxes? Do I have to pay taxes on this?

    • Fortunately, at the time your mom transfers the property to you, there is no federal tax implications because the “basis” of the property also transfers to you. However, if you sell the home and make a profit, you will have to pay capital gains tax on that amount. For example, if your mom bought the property for $100,000, the basis on the property when she gives it to you is $100,000. If later you end up selling the home for $300,000, you then have a taxable gain of $200,000 and will have to pay capital gains tax on that amount.

  26. I’m planning on starting up a business from home and my parents want to help out by giving me $50k, but they don’t live in the US, would i be liable for any tax payment? how would i report it?

    • You will not be liable for any taxes on the monetary gift. However, your parents may be responsible for a gift tax being that your suggested amount exceeds the annual exclusion amount of $14,000 for tax year 2016. Your parents will need to check with the laws of the country they reside in to make sure they are in compliance with those rules and guidelines.

  27. Chrissy McDowell says:

    my dad sold his condo and wants to give me half of the proceeds to help me pay some of my bills. The other half of the proceeds is going to help him buy a house with himself and my brother for them to share. Do I have to pay taxes on that money?

    • You will not have to pay a gift tax on the amount your dad gives you. However, it’s important for your dad’s gift to not exceed the annual exclusion amount of $14,000 for tax year 2016 if he wants to avoid being subject to a gift tax on the amount he gives you.

  28. My dad paid cash for an auction house for my family. He put the house under my husband and my name. We plan on taking out a mortgage to repay him the cash he put down. But, now the house is in our names and shows that it was paid with cash by us and we also took out a loan for that same address. What will happen when we do taxes? Do we have to pay any kind of extra fees? Feeling very confused??

    • In this case, your dad would likely need to file a gift tax return if the house value is more than $14,000. And being that you already technically own the home, you may not be able to take out a traditional mortgage. Using a home equity line of credit (HELOC) is an option to pay back your father and the interest on the HELOC will be tax deductible similar to a mortgage. There will not be any other fees or taxes related to this item on your tax return. However, we would suggest consulting with your loan provider first before making any decisions to discuss your options and determine the best fit for your situation.

  29. My mom gave a gift of 254.000 dollars does she have to pay or do I

    • Will your Mom adopt me?..lol..God Bless Her

    • You are not liable for any tax on the gift, however your mom will want to make sure she files a gift tax return when she files next tax season. She is responsible for the taxes associated with the gift, however due to the lifetime gift tax exclusion, she will not have to pay any tax until she has given over $5.43 million*.

      *guideline as of tax year 2015

    • In this case, your mom would be liable for any gift tax and would need to make sure she files a gift tax return next filing season.

  30. Can you please talk about the Lifetime gift tax exception and how to apply for it?
    Thank you

  31. my son incurred 125000 in bail and legal fees, my parents gave the money to me to dispurse to him

    my parents file joint taxes and paid taxes on this money. I file joint taxes with my wife and our combined income is about 85000. my son (with legal problems / 19 going on twenty and living at home no going to college yet) and daughter (senior in highschool) are dependents. 56000 could be claimed as a gift

    what can I do to not incur any taxes on the other 44000?

  32. can i receive $14000 from more than 1 family member without having to pay taxes. I am in the process of buying a house and my dad was going to give me $14000 and my brother $14000 for the down payment. Would I have pay taxes since it is coming from 2 different family members?

    • Tina,

      You would not have to pay any taxes whatsoever on any gift received. The only people who would have to worry about taxes in this situation would be the family members but even they won’t have to pay or file a gift tax return because they are allowed to give up to $14,000 per person per year in 2015. The number of family members giving you a gift has no importance whatsoever.

      Edward

  33. David A. Davis says:

    What, if any, taxes are to be paid on money given to workers from the owner each week during the year and for year after year. Personal checks are written for $300-$3,000 a week to some of the more than a dozen females. Much is supposedly for needs like a new motorcycle for the husband of one, new
    TV for others and some just go on vacations and buy jewelry. Not related with any of them and prefers to use them for groping . It is hard for me to believe these minimum wage girls are buying new cars, dressing nice, I phones etc. when they make min. on 35 – 40 hours a week. Loophole or a week IRS?

  34. My fiancee gave me substantial gift, He is not a US citizen, how much tax would I have to pay?

  35. I have the same question as the last person. My mother in Canada is planning to give me around $100-$150,000. I am residing in the US on a G4 visa. Will I have to pay tax on the gift? Thanks Rhoda

    • Aravinda says:

      Hi Rhoda,

      Did you receive a reply for this question. I am going through the same process and would like to know if I would have to pay a gift tax for $100000.

      Thanks
      Aravinda

  36. My Parents live in israel and i live in nyc they want to transfer me money as a gift
    is that a problem for me? who shell i “report” my self so i dont have problem later on
    i need to point out im currently on green card but already in process to become citizen
    thank you in advance

  37. Mary Lee Rieley says:

    Is it a correct assumption that when there are 4 in the family – Son, daughter-in-law- grandchild and grandchild that I can then give 14,000 for each person.

    Thanks

    • That is correct Mary, but that is the limit per year per person. You also get a lifetime exemption of $5.43 million in case you happen to go over that $14,000 threshold. If you do go over the $14,000, you must file a gift tax return. The likelihood of you paying any gift tax though is slim because of the lifetime exemption.

      Edward

  38. Ashley Tenczar says:

    My Grandmother, whom is still alive, set up paperwork to where my MOM receives the profit from the sale of her condo- which sold two years ago, and was 180,000.
    The tax preparer had to consult a supervisor, etc, and they said they don’t think that the gift means that Mom owes taxes on it- but they said something about the “five year” period of time, which DID pass- being the reason that the inheritance is not taxable.
    Now she got paperwork from the IRS, which isn’t an “audit” but is asking for proof of this or that- but doesn’t say anything about the inheritance- but asks for other proofs such as the “circuit breaker” Senior credit proof.
    ANYONE who can give me feedback on this issue would be helpful!

  39. Duane Francis says:

    If I get a gift of farm land from my parent, is the basis the the date of the gift or the date when my parent inherited it 12 years ago.

  40. RICHARD SEWARD says:

    I HAVE A FRIEND LIVING WITH ME FOR THE LAST 4 MONTHS AND HE PAYS ME NOTHING. IS THERE ANY TAX FOR THIS?

  41. Hi my mom lives in Canada and wants to give me a one time gift of 100,000 – 150,000 dollars

    Is that money taxable for me?

    Is that money taxable for my mom in canada?

    Thanks

    • Nga Nguyen says:

      Hi My parents live in Viet Nam and wants to give me a one time gift of $300,00-$500,00 dollars.
      Have I pay tax for that money?

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