Money Girl Q & A: When Is a Holiday Gift Taxable?
You just received a large amount of cash as a holiday gift. Do you need to report it on your taxes? Find out here.
Laura Adams, MBA
Q. My father gave me a large amount of cash as a holiday gift this year. Do I have to report it on my tax return?
Answer. The funny thing about federal gift taxes is that the giver must pay them—not the person who receives the gift! So you’re in the clear. But your father may owe taxes depending on how much he gives you.
Here are 6 tips to know when a gift you give is taxable:
- There’s an annual dollar exclusion. For 2014, the gift tax usually doesn’t apply until the value of the gifts you give someone exceeds $14,000.
- Married couples can give more. For 2014, you and your spouse can give up to $28,000 to any third party without making a taxable gift.
- Gifts to a spouse are not taxable. You never owe tax on money or property worth more than the annual exclusion that you give to your spouse.
- Gifts are not tax-deductible. You can’t deduct the value of gifts from your taxable income unless they are qualified charitable contributions (see IRS Publication 526, Charitable Contributionsopens PDF file for more information). Â
- Expenses paid to an institution are not taxable. If you want to pay someone’s college
tuition or medical expenses, sending money directly to those institutions allows you to make a gift that isn’t taxable. - Political donations are not taxable. Sending money to a political organization doesn’t count as a charitable contribution, but it also isn’t subject to the gift tax.
tuition or medical expenses, sending money directly to those institutions allows you to make a gift that isn’t taxable.For more information, refer to IRS Publication 950, Introduction to Estate and Gift Taxesopens PDF file .
Other Links You Might Like:
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6 Life Events That Come with Tax Benefits
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About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.