WHO PAYS THE GIFT TAX FOR GRANDMA AND POPS?
Probably nobody. Ever. This tax has the reputation of being the most misunderstood and ignored tax the IRS has ever dreamed up. It also causes a lot of knee-jerks and eye-rolls.
According to the IRS, the donor, Grandma and Pops in this case, are generally responsible for paying the gift tax. Under some special arrangements, the receiver, Grandbaby or son and daughter-in-law in this instance, may agree to pay the gift tax instead.
“THIS CAN’T BE TRUE! WHAT HAPPENED?”
Chances are, about 99.9% of the time (a bit less than this Ivory Soap purity rating) nothing happened that involves paying a gift tax. If Grandma gives you or Grandbaby gifts valued at more than $14,000 (each) in 2015, she must file a gift tax return. But that doesn’t mean she (or she and Pops, even if he also gave a $14,000 gift) will owe a gift tax.
THIS DOESN’T MAKE SENSE!
Misunderstood and ignored. The Gift Tax earned it’s reputation. Currently, and generally speaking, unless Grandma and Pops have given away over $5.43 million in their lifetime (2015) they, as the taxpayer, do not pay a Gift Tax. Want more IRS info?
A GIFT CAN BE A WONDERFUL…GIFT!
Take a look at this another way. If Mom and Dad give you $28,000 as a gift in 2015, chances are again about 99.9% you don’t need to worry about paying tax on that very nice gift. Since neither Mom nor Dad exceeded their $14,000 limit, or EXCLUSION, to YOU, the IRS doesn’t really care unless Mom and Dad had reached or exceeded their $5.43 million lifetime exclusion limit. Gift Tax
QUICK AND “EASY” FROM THE IRS… Or you can email me!
What can be excluded from gifts?
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.
Gifts that are not more than the annual exclusion for the calendar year.
Tuition or medical expenses you pay for someone (the educational and medical exclusions).
Gifts to your spouse.
Gifts to a political organization for its use.
In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.
May I deduct gifts on my income tax return?
Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions). If you are not sure whether the gift tax or the estate tax applies to your situation, refer to Publication 559, Survivors, Executors, and Administrators.
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