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7 Tips To Determine If Your Gift Is Taxable



If you gave money or property to someone as a gift, you may wonder about the federal gift tax. Many gifts are not subject to the gift tax.

Here are seven tax tips about gifts and the gift tax.

1. Nontaxable Gifts. The general rule is that any gift is a taxable gift. However, there are exceptions to this rule. The following are not taxable gifts:

• Gifts that do not exceed the annual exclusion for the calendar year,

• Tuition or medical expenses you paid directly to a medical or educational institution for someone,

• Gifts to your spouse (for federal tax purposes, the term “spouse” includes individuals of the same sex who are lawfully married),

• Gifts to a political organization for its use, and Gifts to charities.

2. Annual Exclusion. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you give a gift to someone else, the gift tax usually does not apply until the value of the gift exceeds the annual exclusion for the year. For 2015, the annual exclusion is $14,000 (same as 2014).

3. No Tax on Recipient. Generally, the person who receives your gift will not have to pay a federal gift tax. That person also does not pay income tax on the value of the gift received.

4. Gifts Not Deductible. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).

5. Forgiven and Certain Loans. The gift tax may also apply when you forgive a debt or make a loan that is interest-free or below the market interest rate.

6. Gift-Splitting. You and your spouse can give a gift up to $28,000 to a third party without making it a taxable gift. You can consider that one-half of the gift be given by you and one-half by your spouse.

7. Filing Requirement. You must file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, if any of the following apply:

• You gave gifts to at least one person (other than your spouse) that amount to more than the annual exclusion for the year.

• You and your spouse are splitting a gift. This is true even if half of the split gift is less than the annual exclusion.

• You gave someone (other than your spouse) a gift of a future interest that they can’t actually possess, enjoy, or from which they’ll receive income later.

• You gave your spouse an interest in property that will terminate due to a future event.

Questions about the gift tax? Don’t hesitate to connect with me on TaxConnections.

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Dan has been preparing tax return for US Taxpayers and Expatriates since 1998 beginning with US military and Embassy mission personnel in Bangkok, Thailand. He has always loved math and took business accounting at City U. in Seattle Washington. Dan worked at Clint Gordon & Associates (Accredited Tax Consultant) were he gained his foundational knowledge of the US taxing system.

Dan has been studying tax preparation and tax law ever since increasing his skill and knowledge of the tax preparation business accordingly, Dan is known in many circles around the globe as an Expatriate Tax Expert. His book entitled “The Complete US Expat Tax Book” has recently been published and is available on Kindle, Amazon and booksellers around the world.

Thru the years, Dan has fought many battles with the Internal Revenue Service as well as various state taxing departments with great success in helping lower and or eliminate his clients tax debts.

Dan Gordon and his staff enjoy the work they do from the simplest 1040EZ to the most complex corporations, with the goal that no client should pay more tax than legally required.

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