Friday, December 13, 2019

What is the Gift Tax?


Did you know that, in some cases, if you receive a gift, taxes may have to be paid on that gift?

There exists a tax in America known as the “gift tax,” and it’s a tax assessed on the value of a gift given from one person to another. Of course, if the gift comes from your spouse and your spouse is a citizen, the gift is exempt from taxation. But, in other cases, gifts and their value may be taxed. 


Determining if a Gift is Taxable

Usually, the type of gifts that are taxed are things like jewelry, property, or stocks.

You can determine if a gift tax applies by considering whether or not the gift recipient pays for the full fair market value of the property. If not, a gift tax will apply.

Likewise, think about whether or not the gift giver will one day get the property back. If the answer is no, the gift tax applies.

Who Pays?

If a gift is indeed taxable, you may be wondering who has to pay up when it comes to the tax.

The answer is the person giving the gift. The giver has to pay the tax, report the gift to the IRS via a special gift tax return form, and also file and pay state taxes if required.

The recipient may have to pay capital gains tax if they sell the property they’re gifted. But, other than that, they just get to enjoy their gift without any worries or obligations, proving it’s a lot nicer to be on the receiving end of this transaction.

If you’re thinking about giving a gift or accepting one and you have questions related to the gift tax and how it may affect you, remember that you can always seek advice from a financial professional.

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