You may give that family home to someone dear to you, but be sure to let the IRS know about it. Gifts are kind acts, appreciated and possibly taxed. The gift is not taxable to the person receiving the money or property. The person donating the item might need to file a gift tax return and could owe the IRS money.
The federal government does not allow people to gift property before death to avoid estate taxes. Donors should file Form 709 when the annual total value of gifts exceed $14,000 to another person. Some gifts do not count towards the annual limit. Charities do not have a limit and do not subject a generous person to the gift tax. Amounts paid directly to a qualifying educational institution for tuition or amounts paid directly to a hospital or doctor for medical expenses do not count toward this annual limit. Gifts between married couples are not subject to the gift tax.
If a discussion has arisen about the gift tax, contact The Medford Tax Experts.
If you give $14,000 to a person and $14,000 to the spouse, you are not subject to the gift tax, because the tax applies to more than $14,000 to any one person. If you give $14,000 to a person in December and then $14,000 in January, you might not need to pay a gift tax.
If you give more than $14,000 to one individual in a year, you should file a gift tax return to report the taxable gift. Your gift might be taxable if the amount of the gift is more than the annual exclusion amount.
However, you are allowed to gift up to a lifetime exclusion amount before you are required to pay this gift tax. The lifetime exclusion amount is indexed to inflation and currently is more than $5,300,000. That’s right five million dollars.
If you have made large gifts or plan to do so, be sure to discuss this with us. The IRS has three years to review and determine whether your gift tax return is accurate. There is no time limit if you not filed a gift return. Filing the paperwork can save you from headaches down the road.