Gift Taxes
In 2011, if you give any one person gifts such as cash or property valued at more than $13,000, you must report the total gifts to the Internal Revenue Service. You may have to pay tax on the gifts, but the person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.
Gifts include both cash and property, including the use of property, without expecting to receive something of equal value in return. For example, if you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.
There is a lifetime maximum of $5 million and there are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit of $13,000 in 2011:
- Tuition or medical expenses that you pay directly to an educational or medical institution for someone’s benefit
- Gifts to your spouse
- Gifts to a political organization
- Gifts to qualifying charities (also deductible on your tax forms for the value of the gifts made)
If you are married, both you and your spouse can give separate gifts of up to the annual limit of $13,000 each or a total of $26,000 in 2011 to the same person without making it a taxable gift.
If you’re confused about gift taxes or need more information,we can help clear up the confusion. Contact our office today.
By Leon Clinton