Gift Limit

[Christian]

A client wants to give an adult child $14,000 this year and asked if he gave any amount over this would that be taxable income to the child. I don't know squat about gift taxes so any input would be appreciated.

[michaelmars]

nope, the giver might have a tax to pay depending on facts and circumstances but the receiver, never.  Don't know VA rules though.

[Pacun]

The person receiving the money never pays taxes. The person giving it is the one that has to file gift tax if he gave to any one person more than $14K.

So, technically if you give 30K to one person, you have to file a gift tax but since the uniform credit (sp) is in the millions, you will not pay taxes every if you estate when you die is less than 5M, I think.

[Lion EA]

And, the $14,000 per person includes everything given in that calendar year, such as holiday gifts.

[Gail in Virginia]

But married couples can "split" gifts so that if mom and dad give their child $20,000 it counts as $10,000 from each of them rather than as being over $14,000 from one of them.  If they choose to make that election. 

[Possi]

My client gave their daughter $80k to help her and her husband buy a house... but my client is also on the deed. So, I took it as a purchase and not a gift. Haven't done the return yet. If they are on the deed, it's not a "gift" correct? I'm not sure if they are on the mortgage, but probably so.

[SaraEA]

I wouldn't say the donee never pay the gift tax.  If the donor doesn't pay it, the donee will be held liable.  That said, it's unlikely any gift tax will be due.  The unified exemption (lifetime gifts + what's left in the estate when the giver dies) is over $5.4 million ($10.9m MFJ).  Giving over $14k to one recipient in one year means a gift tax return will have to be filed, but that's just a way for the IRS to keep track of how much a person has gifted.  State lifetime limits may be lower, so check that out.  So many people think they can only gift $14k a year.  I always tell them they can give however much they want; if over $14k worse that can happen is that they have to pay me to file gift tax returns but they won't pay any taxes.  Unless, of course, they've already given over $5.4m.  That always brings on a smile.

Possi, your client has bought a portion of the house so not a gift.  Who's on the mortgage doesn't matter.  How many times have you seen divorced couples where one spouse gets the house but the mortgage company won't release the other spouse from the loan?  The poor guy or gal ends up being responsible for a loan for a home they don't even own anymore.

[Christian]

Thanks for all the responses. I clearly understand now how it works. I'e seen folks give thousands of dollars of land to their heirs and never paid a dime and wondered just how this works.