Home > Tax News & Info > Do I need to report gifts on my taxes? The answer and other facts about taxable gifts.

Do I need to report gifts on my taxes? The answer and other facts about taxable gifts.

Recipients of gifts have often wondered if the receipt of the gift is taxable and reportable on their individual tax return. The answer is typically no.  Depending on the property received and in general, the recipient of a gift is not required to pay tax or report the gift on their individual tax return.

On the other hand…

The giver of a gift is sometimes required to pay tax and file a specific Gift Tax Return after making a gift.  The following types of gifts are non taxable:

  1. Gifts that in total are valued at less than $14,000. This $14,000 threshold is known as the annual exclusion and is subject to change from year to year. The giver may gift up to $14,000 per person in 2016 without being subject to gift tax or filing requirements.
  2. Tuition paid directly to an educational institution.
  3. Medical expenses paid directly to a medical institution.
  4. Gifts to your spouse.
  5. Gifts to charities.
  6. Gifts to political organizations.

A gift can also be non-taxable if spouses decide to combine their annual exclusions. In essence the gift would be considered to be half from one spouse and half from the other.  With this strategy, couples can gift up to $28,000 in 2016 without causing a gift to be taxable.  Any time a couple splits a gift there is a reporting requirement, even if the gift is non taxable.

Other situations that trigger a filing requirement:

  1. Gifts over the annual exclusion that are not specifically excluded.
  2. Gifts of a future interest that can't be possessed, used, or produce income until a later date. (Spouses excluded)
  3. Gifts of property to spouses that will expire due to an event in the future.

Gifts that are taxable or trigger a filing requirement must be reported on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return by April 15th of the year following the gift. The state of Minnesota does not have a gift tax, so there is no filing requirement in Minnesota.

Even if you are required to file a gift tax return, each person has a lifetime limit of $5,450,000 (in 2016) that they may gift before paying tax.  However the $5,450,000 lifetime exemption is for both gift and estate tax so any amount that you use on your gift tax return will reduce the amount that you may use on your estate return in the future.

Gift giving can be tricky once the dollar amount begins to rise and different situations have different outcomes. For example, a personal loan or debt that is forgiven could be considered a gift but when a parent throws a wedding for a child, the party may not be a gift.  If you are considering giving a gift over the annual exclusion contact your tax preparer and discuss any tax consequences. Or at a minimum, make sure to tell your tax preparer about any large gifts during the tax year so they may advise you on any filing requirements.

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