What is Gift Tax?
Who pays it? What is gift tax? Gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not. Gift tax applies to the transfer by gift of any property. You may make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. It is important to note that if you sell something at less than its full value or if you make an interest free or reduced interest loan, you may be making a gift. Who pays the gift tax? The donor is generally responsible, however the donee may agree to pay the tax instead. If you are considering this arrangement, a tax professional may need to be consulted to ensure payment is properly handled. When is the gift tax due? Gift tax is paid by the same deadline federal taxes are due – April 15 – following the year in which t
Gift tax is the tax that is imposed on the transfer of property by gift during each calendar year. What Transfers of Property by Gift May Be Subject to Gift Tax? In general, all transfers of real or personal property by gift, whether tangible (such as a car, boat or jewelry) or intangible (such as cash) that are made by you (the donor) to someone else (the donee) are subject to the gift tax. When is a Transfer of Property Considered a Gift? In general, a transfer of property is a gift if the fair market value of the property (less encumbrances) exceeds the amount received (in money or other type of payment) for the property. Therefore, if you give property to another person or entity or if you sell it (other than in the regular course of business) for less than it is worth, you may be making a gift. What is the Difference Between a Gift of a Present Interest and a Gift of a Future Interest? With a gift of a present interest the donor is allowed an annual exclusion of $10,000 per donee.
In some countries, when people give a large enough gift or transfer property to others while they are still living, they may need to pay a gift tax. In the US, for instance, the Internal Revenue Service (IRS) has specific rules about the amount that can be given to someone else without incurring this tax. There are also guidelines in IRS publications for what is considered a gift, and for the amount of tax that will be incurred based on the value of the gift. Where gift tax rules apply, a person may be allowed to give gifts of a certain amount before the beneficiary has to pay a gift tax. In IRS law for instance, you can give an individual a gift of about $13,000 US Dollars (USD) per year without paying a gift tax. A husband and wife may both give the same person this gift, giving a total of $26,000 USD per year. This amount is subject to change, so it is advisable to check tax law for current allowable amounts. The person giving the gift usually pays the tax, though there are circumst
