Do I Owe Taxes on a Gift? #368

by | Jan 26, 2024 | Videos

Do I Owe Taxes on a Gift?

Key Take-aways from the question, “Do I Owe Taxes on A Gift?”:

  • If you are the recipient of a gift, you do NOT owe a gift tax on this money.
  • In 2024, if you are a gift GIVER, you can now give up to $18,000 to one person, without needing to file a gift tax return.
  • A married couple can each give $18,000 to the same person, allowing for a combined gift of $36,000 without needing to file a gift tax return.
  • The gift tax return is IRS form 709, which is only required if your gift exceeds $18,000.
  • The lifetime gift exclusion amount is $13.6 million if you pass away in 2024, meaning you won’t owe gift tax unless your cumulative gifts exceed this amount.

Do I Owe Taxes on a Gift? Links

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IRS Form 709 (actual form)
IRS Instructions for Form 709

Do I Owe Taxes on a Gift – Transcript

Do I owe taxes on a gift?

Do I have to pay taxes on a gift that I got?

We get that question a lot. And I’m really a little surprised that we get it as frequently as we do.

If you are the recipient of a gift you do NOT owe a gift tax on this money.

The other follow-up question we get is “OK, I don’t have to file a gift tax. But I have to declare it, right? I have report this income?”

No. It is not reportable income.
It is not something that’s going to be taxable to you.

One of our friends in the industry said something that we will never forget: “When you get a gift – if you’re recipient of the gift – it is your obligation to “say thank you” and walk away!”

That’s it!
You have no other obligation.
You don’t file a gift tax return.
You don’t declare it as income.
Do I owe taxes on a gift?  No.
It’s not taxable income to you,either.

In 2024, if you are a gift GIVER, you can now give up to $18,000 to one person, without needing to file a gift tax return.
You only need to file a gift tax return if your gift exceeds $18,000.

I want you to think about this. If you give gift to a family member for $18,000, AND you’re married — your spouse can give up to $18,000 – more – dollars to the very same person.

That’s $36,000 in gifts that you could give to someone – without needing to file a gift tax return.
That’s very important.

The gift tax return, in case you’re curious, it’s IRS form 709.

That’s worth taking a look at, because you’ll learn some valuable information there.

First of all, the gift tax threshold is indexed for inflation. So it’s been going up every a year for the last few years.

A few years ago it was $15,000, now it’s $18,000.

But I want to walk through an example with you – that I think will help shed a little more light on the situation.

Suppose you’ve got a married couple, a husband and wife. And they’ve got two sons. They are both married.

So they’ve got two spouses. And between the two younger families, the next generation, they have three (grand)kids.
Let’s go through some math.

The husband can make a gift to each of his two sons. That’s $36,000.
He can give a gift to each of his daughters-in-law. That’s another $36,000.

He can also make $18,000 gifts to each of the three grandchildren. That’s $54,000.
Add it up – we’ve got $126,000 in gifts — and NO gift tax return has been filed.

Oh wait. It gets better.

His spouse – his wife – can now make the exact same gifts!

This is a way that a married couple can move $252,000 out of their estates and make gifts – without even filing a gift tax return.

But what if you do make a gift that’s over eighteen thousand dollars?

You have to file this form that I mentioned a moment ago, IRS form 709.
It’s a lifetime exclusion for gifts that are made, gifts made, during your life.

And so what happens is there’s a cumulative count. Suppose you made $400,000 in gifts over the course of your lifetime.

When you pass away, you have a lifetime gift exclusion — if you pass away in 2024 — of $13.6 million.

You’re not going to have a gift tax unless you give gifts in excess of $13.6 million. You are going to be very well-liked – and popular – if you’re doing something like that!

That’s a lot of money to give away. Yes – you DO have to file a a gift tax form, the form 709.

But until you exceed $13.6 million — if you pass away in 2024 — you’re not going to have an issue.

Where that MIGHT become an issue is if Congress rolls back some of these estate and gift tax thresholds in future years.
We don’t know if that’s going to happen.

But right now, “gift away!”
And don’t forget to “say thank you!”

That’s the message for episode 368, “Do I Owe Taxes on a Gift?”
Thanks, as always, for tuning in!

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