Gift Tax – Clearing up the ConfusionJanuary 9, 2013
There is a great deal of confusion about gifting and gift taxes. The federal gift tax law is completely apart from the income tax law. Neither party to a gift should include the gift information on their income tax return. The gift is not tax-deductible by the one giving the gift, and it is not taxable income to the one receiving the gift. But a gift tax return may need to be filed.
So, who has to file a gift tax return? The gift tax applies to the transfer of money or property from one individual (the donor) to another (the donee). If a gift tax return is due, it is filed by the donor.
Certain gifts are not taxable and do not require the filing of a gift tax return, including the following:
*Gifts in 2012 of $13,000 or less per person to any number of people are not taxable. That limit increases to $14,000 in 2013.
*A payment for another’s tuition made directly to an educational institute.
*A payment for medical treatment of another made directly to the medical facility.
*Unlimited gifts made to one’s spouse (there is a dollar limit if the spouse is not a U.S. citizen).
If you make taxable gifts, a Form 709 is due by April 15 of the following year (the same due date as your federal income tax Form 1040). But don’t panic, you probably won’t owe gift tax. In addition to the above exclusions, you have a lifetime exemption — in 2012 the exemption is $5,120,000. This exemption is scheduled to drop to $1,000,000 in 2013 unless Congress acts to change the law.
If you make gifts beyond the above exclusions, please contact us for assistance
Tags: Gift Tax
Written by: Doug Rodrigues