What are the tax implications of giving cash gifts to family

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What are the tax implications of giving cash gifts to family

Postby Paul22 on Tue Feb 23, 2010 10:50 am

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What are the tax implications of giving cash gifts to family? Is there a one time tax free option? I will be selling my home soon and would like to split the profits with my mother and brother, but it will not be worth it if they have to pay taxes on what I give them.
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Re: What are the tax implications of giving cash gifts to family

Postby photomom04 on Tue Feb 23, 2010 2:15 pm

Im not sure where you are but in the US I believe there is a set amount per year that can be gifted. You should really check with a CPA.
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Re: What are the tax implications of giving cash gifts to family

Postby ladybug on Mon Mar 22, 2010 7:47 am

Paul22 wrote:What are the tax implications of giving cash gifts to family? Is there a one time tax free option? I will be selling my home soon and would like to split the profits with my mother and brother, but it will not be worth it if they have to pay taxes on what I give them.


That information should be availabe somewhere on your government web page. if they have a search feature just enter gifts or gifting or whatever.
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Re: What are the tax implications of giving cash gifts to family

Postby aldwin47 on Sat Mar 27, 2010 9:23 am

First, the check must clear before the end of the year to be a valid gift that year. Second, the check needs to be deposited in an account in the name of the donee and the donor's name. Whether you make a cash gift or a non-cash gift, the annual free gift per donee is $13,000.
The portion of the gift in excess of $13,000 per donee per year must be reported on a gift tax return, and it will be charged against the donor's $1,000,000 free lifetime giving amount. This same amount will also be charged against the donor's at death free giving amount ($3,500,000 in 2009). Lifetime gifts in excess of the $1,000,000 are subject to gift tax.
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Re: What are the tax implications of giving cash gifts to family

Postby rdadwert on Mon Feb 21, 2011 1:22 am

It is some years since I did a lot of tax, so may be a bit out of date.Tax law changes very rapidly.A gift is anything of value, including but not limited to money which is given to another person,charity or organization without hope or expectation of reward, repayment or receipt of anything of similar value.
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Re: What are the tax implications of giving cash gifts to family

Postby weebitty on Mon Feb 21, 2011 4:22 am

The way I understand it you can give up to $11,000 to an individual without them paying taxes on it as income. You as the gifter can't take it off of your taxes but it does reduce your estate for inheritance tax. I maybe wrong on this but that is how it was explained to me. The limit may have been raise but that is the explaination I got a few years ago.
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Re: What are the tax implications of giving cash gifts to family

Postby macwan on Tue Mar 15, 2011 12:58 am

You need to consider your overall estate planning.I'm thinking more the tax implications for us, if the funds are coming out of our savings account.If the gift takes place inside the US, the payer is liable to gift tax.If the payer is a non-US resident,the amount of the gift in excess of $13k is subject to gift tax.
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Re: What are the tax implications of giving cash gifts to family

Postby wakawaka on Sun Jul 08, 2012 10:43 am

786

You asked this question years ago and things have changed (like the real estate market) since you asked.

However, the first part of the answer is that the people to whom you are giving your house or its selling price are not responsible for tax. it is not taxable income to them. You as the donor are potentially responsible for gift tax. This is the gift tax land, not the income tax land.

Right now the annual exclusion is $13,000 per year, so you (and your spouse if applicable) can donate $13,000 to each person ($26,000 if you combine with your spouse--if you write one check you have to fill out IRS form 709) to each person.

That $13,000 is just the annual exclusion. There is also a lifetime unified credit. Currently it is more than $5,000,000 per spouse (and the spouses if they jump through the right hoops are able to combine their unified credits as well). Therefore unless your house is palatial you can give it or its proceeds to your mother and brother without likely being responsible for gift taxes (assuming you have not given millions away already during your life).

Now, some qualifications. The $5,000,000 unified credit (I believe it's actually $5.12 million right now) is scheduled to be drastically reduced to $1,000,000--however this issue is a sensitive political subject which is highly volatile and dependent on the 2012 elections--Republicans are likely to want to continue the very high unified credit and Democrats are likely to want to repeal it.

The annual exclusion, however, is less likely to fluctuate. Currently $13,000, it is indexed to grow over time in $1,000 increments and is about due for another increase to $14,000 (perhaps in 2013). The foundation tax advice for people with large estates is to give annually and continuously in increments equal to the maximum annual exclusion.
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Re: What are the tax implications of giving cash gifts to family

Postby wakawaka on Sun Jul 08, 2012 10:53 am

By the way, even if you have no gift tax liability you should have an accountant or lawyer file a form 709 for you, generally speaking, for gifts over the annual exclusion amount. The 709 is due April 15th like your 1040. You are legally required to file Form 709 (usually) for gifts over the annual exclusion, even where no tax is due. Although it is unlikely you will be assessed penalties for failing to file the form if you have no tax due, it's better to comply with the law. You'll need a lawyer who specializes in tax (sorry, expensive) to do it. In theory you can do it yourself, but the form is actually a little bit confusing because it has a lot of trust-related questions in it and you might want to transfer some of your potential liability for mistakes on the form to a professional who specializes.

Recently the IRS has been enforcing the requirement to file form 709 more than before (there are several newspaper articles for example of them enforcing gift tax filing requirements in relation to California real estate deals--I don't know why CA real estate is so interesting right now to the IRS, but apparently it is.
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Re: What are the tax implications of giving cash gifts to family

Postby davidjessy on Tue Jul 10, 2012 8:02 am

its depend upon the cost of the gift or reign also... every country having their own tax graph to implement on these kind of costly gifts
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