Giving is a great thing. It’s great for those receiving, and those giving. It’s also a taxable thing in this modern world. We’re not talking about just any ol’ gift here so don’t get nervous just yet. The gift tax exclusion amount can change, so you will need to check every year for the amount.
There’s an amount of cash that can be given away tax free every year, but beyond that amount things get taxing. This is also known as chapter 12, subtitle B in the Internal Revenue Code.
The gift tax exclusion amount was $13,000 in 2009 and 2010. So giving anything less than that means you don’t have to report it on your tax return. Also keep in mind that it’s the person giving who gets taxed. The person receiving the gift is not required to report any of it or pay taxes on any of it; the person giving is the only one responsible to report the gift. (The only time this is not the case is if there’s a retention of some kind of interest on the gift that makes the transfer slow.)
Besides a gift that falls within the annual exclusion amount, there are some other exceptions to the rule. One example is a gift to a political organization for its use.
Gifts to charities, gifts to one’s spouse, and tuition or medical expenses that one pays for the recipient’s use are all exempt as well. At least there are some ways to give without paying for it!
This funny piece of tax regulation does get fairly complicated, depending on the complexity of your gift situation. If you want to learn more about your specific situation, then skip over to a tax service like TurboTax Online and browse through their award winning library, full of tax-related articles. Or you can pose your specific question to their support network and get a specific answer. Learn more about Gift Tax Exclusion.