Money given as a gift is subject to federal gift tax unless the gift qualifies as an exception, reports the IRS. Only Connecticut and Minnesota impose state gift taxes, and the exemptions are $2 million and $1 million respectively as of 2015, according to Nolo.Continue Reading
Money gifts that are not subject to federal tax include gifts to individuals that are less than the annual exclusion amount of $14,000 per recipient as of 2015, states Nolo. Spouses each have a $14,000 exclusion amount, so a couple can give $28,000 a year to each person. Money gifts paid directly for medical expenses or to a school for tuition as well as gifts to spouses, political organizations and qualified charities are also not taxable. Gifts of money given after death as part of an estate are only taxable if they exceed the $5.43 million federal estate tax exclusion as of 2015.
Gifts are defined as transfers of assets for which the giver does not receive consideration in return, according to the IRS. The donor and not the recipient is usually responsible to report gifts and pay gift tax. Gifts of money, apart from qualifying charitable contributions, are not deductible on income tax returns. If gifts exceed excludable yearly amounts and gift taxes are payable, taxpayers use IRS Form 709, reports Nolo. Because filing a gift tax return is a complex procedure, many people hire an experienced attorney or certified public accountant.Learn more about Taxes