Gift Tax: Do I have to pay gift tax when someone gives me money?
Updated for Tax Year 2015
Surprise – Mom and Dad gave you a nice check! Maybe it’s enough for dinner, or maybe it’s more of an “early inheritance.”
Either way, do you need to worry about paying tax on your gift?
First, a gift must be quite substantial before the IRS takes notice.
A gift of $14,000 or less in a calendar year (2015 and 2016) doesn’t even count.
If a couple makes a gift from joint property, the IRS considers the gift to be given half from each. Mom and Dad can give $28,000 with no worries.
A couple can also give an additional gift of up to $14,000 to each son-in-law or daughter-in-law.
The effective annual limit from one couple to another couple, therefore, is $56,000 ($14,000 X 4 = $56,000).
Some transfers of money are never considered to be gifts, no matter the amount.
For purposes of the gift tax, it’s not a gift if:
- It’s given to a husband or wife who is a U.S. citizen. Special rules apply to spouses who are not U.S. citizens.
- It’s paid directly to an educational or medical institution for someone’s medical bills or tuition expenses. (It doesn’t have to be a child, or even a relative, for this exception.)
The person who makes the gift files the gift tax return, if necessary, and pays any tax.
If someone gives you more than the annual gift tax exclusion amount ($14,000 in 2015 and 2016), the giver must file a gift tax return. That still doesn’t mean they owe gift tax.
For example, say someone gives you $20,000 in one year, and you and the giver are both single. The giver must file a gift tax return, showing an excess gift of $6,000 ($20,000 – $14,000 exclusion = $6,000).
Each year, the amount a person gives other people over the annual exclusion accumulates until it reaches the lifetime gift tax exclusion.
Currently, a taxpayer does not pay gift tax until they have given away over $5.43 million in their lifetime (2015).
If the donor does not pay the tax, the IRS may collect it from you.
However, most donors who can afford to make gifts large enough to be subject to gift taxes can also afford to pay the tax on the gifts.
Sally Herigstad is a certified public accountant and personal finance columnist and author of Help! I Can't Pay My Bills, Surviving a Financial Crisis (St. Martin's Griffin). She writes regularly at CreditCards.com, Bankrate.com, Interest.com, RedPlum, and MSN Money. She is an experienced speaker and a member of Toastmasters International. Follow Sally on Twitter.
My uncle would like to gift me $150k for a downpayment on a house.
My first Q is: Is an “uncle” generally deemed an acceptable “family” member to be receiving a monetary gift for a downpayment from?
Second Q: If he never gifts over the $5.43 million in his lifetime, he will never have to pay taxes on the $150k gift, correct?
Hi Bethany! To answer your first question – yes, your uncle can gift you money. In fact, anyone can gift you money at any time. To answer your second question, you are correct in that if he has never given over $5.45 million (current figure for 2016) in his lifetime, he does not have to pay taxes on any amount given until that point.
My godmother from macau gift me $50000 as down payment to purchase my future property. do I have to pay tax?
No, you do not have to pay tax on any amount gifted to you.