Q. Is there any tax consideration when give or receive a large amount of money?
A. First of all, I am not a CPA, so the following are just for your reference only. Please consult your tax advisor before you taking any action.
First, a gift must be quite substantial before the IRS takes notice.
A gift of $14,000 or less in a calendar year doesn’t even count.
If a couple makes a gift, the IRS considers the gift to be given half from each. Mom and Dad can give $28,000 with no worries.
The effective annual limit from one couple to another couple, therefore, is $56,000 ($14,000 X 4 = $56,000).
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:
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 2014), 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 $5.25 million in their lifetime.
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.
A. First of all, I am not a CPA, so the following are just for your reference only. Please consult your tax advisor before you taking any action.
First, a gift must be quite substantial before the IRS takes notice.
A gift of $14,000 or less in a calendar year doesn’t even count.
If a couple makes a gift, the IRS considers the gift to be given half from each. Mom and Dad can give $28,000 with no worries.
The effective annual limit from one couple to another couple, therefore, is $56,000 ($14,000 X 4 = $56,000).
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 2014), 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 $5.25 million in their lifetime.
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.
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