When do you have to pay a gift tax?

People are sometimes surprised to learn that the IRS regulates gifts over a certain size.  As a donor, you are responsible for reporting the gift if it exceeds $14,000 and paying the gift tax if you have given more than $5.45 million in cash or property (over a lifetime). Regardless of the amount, you cannot deduct a gift as you could with a charitable donation.  As a recipient, you do not need to include the gift as part of your taxable income. However, if you receive property other than cash, you will need to determine the cost basis at the time of the transfer to have the proper value in case you dispose of it later.

Taxable gifts generally do not include gifts:

  • Given to a spouse
  • Provided to a political organization
  • Below the annual exclusion ($14,000 per recipient for 2017)
  • Consisting of tuition or medical expenses you pay for someone else directly to the organization

Donors, call us more information about the specific rules related to filing a gift tax return, particularly if your gift exceeds the annual exclusion or if the transfer is complex.