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Are cash gifts taxable to the recipient?

Dec 26, 2014 by Ken from San Luis Obispo, CA in  |  Flag
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Federal gift taxes apply to the donor, not the recipient. The gift tax is the mirror image of the estate tax. Currently each individual can pass on over $5mm at death without estate taxes applying. Any gifts made during your lifetime that exceed the annual gift tax exclusion amount referenced above, get subtracted from that total $5+ million amount that can be passed onto heirs free of Federal estate tax. Mechanically what happens if you give more than $14K to one individual in a year is that you are required to file an annual gift tax return. But the result of filling out the gift tax return is that $0 is owed now (if the gift is less than $5+ million). The calculated amount is simply subtracted from the total amount that can be passed on to heirs without being subject to the estate tax. (all amounts are approximate).

Comment   |  Flag   |  Dec 26, 2014 from Fort Washington, PA

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Gifts in excess in annual or lifetime exclusions are taxable to the donor.

Comment   |  Flag   |  Dec 26, 2014 from Canton, GA

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John Essigman Level 17

Good job John Myers... I see this often where the $14k annual limitation is quoted without further clarification about the "mechanics" of the lifetime maximums. I think many folks limit their gifting to the $14k believing that they will owe tax if they give more. I think that the lifetime gift tax exemption increases to $5,430,000 for 2015.

Comment   |  Flag   |  Jan 02, 2015 from Cleveland, GA

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This is a common question because most of us expect to be taxed on money we receive. But gifts are different. The short answer is "no." If someone gives you a cash gift - or anything else of value - you do not owe any taxes on the gift. Earned income is taxed. Portfolio income is taxed. Gifts are not taxed to you. There are a couple of other ways you can receive money that's not taxed. The most common other non-taxed income comes from insurance proceeds like the payout on a life policy. The previous answers refer to gift taxes which are the responsibility of the giver, but you don;t have to worry about that.

Comment   |  Flag   |  Jan 05, 2015 from Suffolk, VA

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Hi Ken! You can give up to $14K with no tax repercussions for you or the recipient. And, if you are married, you and your spouse can gift-split and give $28K to one person with no taxes due. You can give $14K to more than one person as well. There may be some instances when taxes are payable by the recipient, but that involves much larger dollar amounts and trusts.

Comment   |  Flag   |  Dec 26, 2014 from River Hills, SC

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Peter Cacioppo Level 16

Generally, amounts over 14,000 affect your estate/gift tax exclusion amounts (done correctly a couple has an over 10 million exclusion). Hopefully, you have an estate planning attorney to give you detailed information. With my clients we prepare a detailed net worth statement and discuss all ramifications to giver and giftee before they meet with their attorney, or possibly their tax CPA.

Comment   |  Flag   |  Dec 26, 2014 from La Jolla, CA

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