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Finance Quick Answers

 

 

What are the tax laws about giving gifts?

 

If you gave any one person gifts valued at more than $12,000 in 2008, it is necessary to report the total gift to the Internal Revenue Service. You may even have to pay tax on the gift.

 

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.

 

You make a gift when you give property, including money, or the use or income from property, without expecting to receive something of equal value in return. 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 are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit:

 

  • Tuition or medical expenses that you pay directly to an educational or medical institution or health care provider for someone's benefit
  • Gifts to your spouse
  • Gifts to a political organization for its use
  • Gifts to charities

 

If you are married, both you and your spouse can give separate gifts of up to the annual limit to the same person without making a taxable gift. That means that both you and your spouse could each have given up to $12,000 to the same person in 2008 without being liable for gift taxes.

 

For more information, get the IRS Publication 950, "Introduction to Estate and Gift Taxes," IRS Form 709, "United States Gift Tax Return," and "Instructions for Form 709." They are available at the IRS Web site at www.irs.gov under "Forms and Publications" or by calling toll free 1-800-TAX-FORM (1-800-829-3676).

 

Source: IRS TAX TIP 2004-38

 

 

Reviewed by Brenda Procter, M.S., State Specialist & Instructor, Personal Financial Planning, University of Missouri Extension

 

 

 

 

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Last update: Monday, November 17, 2008

 

 

 


 
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