Seven Tips to Help You Determine if Your Gift is Taxable
- Nontaxable Gifts. The general rule is that any gift is a taxable gift. However, there are exceptions to this rule. The following are not taxable gifts:
- Those that do not exceed the annual exclusion for the calendar year
- Tuition or medical expenses you paid directly to a medical or educational institution for someone
- Gifts to your spouse (for federal tax purposes, the term “spouse” includes individuals of the same sex who are lawfully married)
- Gifts to a political organization for its use
- Gifts to charities
- Annual Exclusion. There is usually no tax if you make a gift to your spouse or to a charity. If you give a gift to someone else, the gift tax usually does not apply until the value exceeds the annual exclusion for the year. For 2014 and 2015, the annual exclusion is $14,000.
- No Tax on Recipient. Generally, the person who receives your gift will not have to pay a federal gift tax. That person also does not pay income tax on the value of the gift received.
- Gifts Not Deductible. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
- Forgiven and Certain Loans. The gift tax may also apply when you forgive a debt or make a loan that is interest-free or below the market interest rate.
- Gift-Splitting. You and your spouse can give up to $28,000 to a third party without making it a taxable gift. You can consider that one-half be given by you and one-half by your spouse.
- Filing Requirement. You must file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, if any of the following apply:
- You gave gifts to at least one person (other than your spouse) that amount to more than the annual exclusion for the year.
- You and your spouse are splitting a gift. This is true even if half of the split gift is less than the annual exclusion.
- You gave someone (other than your spouse) a gift of a future interest that they can’t actually possess, enjoy, or from which they’ll receive income later.
- You gave your spouse an interest in property that will terminate due to a future event.
(Excerpted from IRS Tax Tip 2015-51)