Will I pay tax on gifts I provide? Will the recipients of my gift pay tax on the amount?
Every year our accountants get questions on gifting and the rules that surround it. Debate no longer; gifting does not create negative current tax year outcomes! Gifts are not included in recipients’ income but instead are tracked on a separate Gift Tax Return of the giver, if the amount gifted is high enough. In one year, each taxpayer can give up to $15,000 to an individual without being required to report the gift. This $15,000 limit is applied per recipient, allowing you to give $15,000 to as many individuals as you please. Once your gifts exceed that $15,000 limit it will then have to be reported and tracked via the giver’s Gift Tax Return. The purpose for tracking these gifts is to make sure one single giver does not exceed the current lifetime gifting limit of $11.2 million. If you one day exceed this $11.2 million threshold it will trigger estate taxes.
Since individual gifts under $15,000 per year are not reported on the givers’ taxes, nor the return of the recipient there is no tax to pay. Additionally, if there is a gift in excess of the $15,000 limit in a year, it is reported on a Gift Tax Return of the giver but still no tax is currently owed.
More information about gifting can be found on the IRS website below.
IRS.gov: Frequently Asked Questions on Gift Taxes