What’s My Taxable Income

Posts Tagged ‘what’s my taxable income’

August 16th, 2010

Question: I need money from a family member. What's the most you can "gift" to someone without paying tax?

A very nice relative has offered to help me out with a nice gift. If I accept the gift, how is it taxed? If they give me, say $20,000, do I have to declare the taxable portion as income?
Also, let's say the tax-free limit is 100$. Could they give 100$ to me and 100$ to my wife without penalty?
Okay, I think I understand. So, let's say I get a gift of $12,001 in 2008. The giver will have to file a gift tax form for the 1$. Then, this is applied to their $1,000,000 gift exclusion (now downt to $999,999). If we did this for a while and they used up the $1M, then they would pay gift (or estate, however the term) tax on it, correct?
Answer: The limit for 2008 is $12,000 before the giver has to be concerned with filing a Gift Tax Return. And yes, they can give $12,000 to you and $12,000 to your wife. If "they" are married, each person can give each of you $12,000 for a total money transfer of $48,000. In all of these scenarios, no one will have to pay tax and no one will have to file a gift tax return.
The recipient of a gift never has to pay tax regardless.
ADDITIONAL DETAILS:
You are absolutely correct...it is the amount over $12,000 that goes on the gift tax return and goes against the lifetime exclusion. A person could give 900,000 different people a gift of $12,001 in a year and would have to file a gift tax return which would eat up $900,000 of their $1M lifetime gift tax exclusion. When they die, that $900,000 goes against their estate exclusion. So, let's say that when they die, there is a $2.5M estate exclusion. Theirs would only be $1.6M because they lost $900k via gift tax.