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Make sure you file a gift tax form on any 'gifts' over $14K a year

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  • J.K.Logic
    2015-03-16 06:09:50 PM
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    Something I've just recently had to deal with is filing a form for gift taxes. For those unaware, since I just got my research on, allow me to enlighten:

    Basically, and I'm really over-simplifying here, but this is the jest -- an individual is allowed to 'gift' any other individual (adult or child, doesn't matter) up to $14,000 a year. That's per person. So you can 'gift' 10 someones $14,000 a piece every year, and not have to worry about filing for a gift tax at all, ever. But once you exceed that yearly limit, you have to file.

    And to clarify, for tax purposes, a gift is a transfer of property (money or real estate) for less than its full value. In other words, if you aren't paid back, at least not fully, it's a gift.

    This can seriously come in handy when transferring estates (houses or other property) to avoid steep appreciation values due to estate tax rules. But otherwise, it's basically just a way for the IRS to keep tabs on how much money transferring you do in a lifetime. Exceed the limit, and you will have to pay the gift tax.

    Finally though, the best part of researching this concludes for me that I will likely never have to worry about it. Even if you exceed the $14K limit in a year to a single person, you are allowed a lifetime of $5.43 million to gift, before you ever have to worry about the 40% tax. Even still, when you exceed that yearly limit, you HAVE to file, hence the lifetime bit. Yes, the IRS keeps tabs on your tally, for LIFE. Kinda sucks for me, but I get it. That's a big allowance, so it's whatever.

    Anyways, hope that helps anyone wondering how gift taxes work. Ohh... the form you have to file, and make sure that you do if you exceed the limit! Here:

    www.irs.gov/pub/irs-pdf/f709.pdf
  • Mary Ellen
    2015-12-14 12:58:57 PM
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    but this is the jest -- (do you mean gist?)
  • YellowSubmarine
    2016-04-09 01:15:04 PM
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    How much is the gift tax?

    Gifts subject to the gift tax. The following gifts are considered to be taxable gifts when they exceed the annual gift exclusion amount of$14,000 in 2014. Remember, taxable gifts count as part of the $5.34 million in 2014 you are allowed to give away during your lifetime, before you must pay the gift tax.

    That's what comes up when you google gift taxes. Good post. Just wanted to clarify and update. Main difference is it's 5.34 million over a lifetime, not 5.43. Not a big deal, and no way most any of us will ever gift anywhere near that amount over a lifetime, let alone even make that much over a lifetime. But just to slightly clarify this post, as I will be having to file this year for over-gifting, I found this post useful. thanks.
  • JFoster
    2016-04-11 12:03:21 PM
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    I can fully relate to this post. When I graduated college, I was gifted money from my grand parents. Two years later, I get a notice in the mail that I owed close to a grand in taxes. There was a lot of jumping through hoops to get to the right person. She asked me the story and I told her it was a gift for graduation. The funny part about that is I wasn't even thinking about using that to get off the hook. She put me on hold and then came back 15 minutes later to tell me that I didn't owe anything. That was definitely a relief.
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