Wait! Before You Gift Someone Something, Know That Gift Taxes Exist!
Did you know that gift taxes exist?
Let’s imagine that you own a brand new Nissan GTR, and you plan to pass that vehicle down to your family like your son. After going to the DMV to file a transfer and sending the vehicle registration, the IRS will know that you have made this transfer and will include a gift tax on your tax statement at the end of the year. Your son who received the car, will not be paying any taxes. Regardless of who the receiver is, the sender will pay additional tax for gifting them an item.
That’s really unfair of them to impose isn’t it?
Well, thanks to some of our great CPA firms in Orange County, they can educate you on these gift taxes. It is pretty certain that most people do not know what these gift taxes are, and we are pretty confident that this will be useful for most of you.
WHO PAYS THE GIFT TAX?
Normally, people who pay the tax gifts are generally responsible for the paying the gift tax. However, the receiver may agree to pay the tax instead. Visit any CPA in Orange County or tax professional if you are looking for this type of arrangement.
But what is considered a gift? Well anything is taxable really. It can go from homes, property, cars, toys, food, furniture, you name it!
There are many exceptions to this rule however –
EXCEPTIONS TO GIFT TAXING
Any gifts that are not more than the annual exclusion for the calendar year. What does that mean? Let’s take a rich person for example, the annual exclusion for 2011 was $13,000, that means that this rich person can gift $13,000 to 10 different people in one year without incurring a gift tax in their statement.
If you gift a tuition or medical expenses by paying for someone, then gift taxes would be excluded.
If you gift to your spouse, you will be exempt from gift taxes.
And finally, gifting to a political organization or charitable organization.
CAN YOU DEDUCT GIFTS ON THE TAX RETURN?
If you make a gift or leave your estate to your receivers of the gift, they will not ordinarily affect your federal income tax. You cannot deduct the value of the gifts you make (Other than gifts that are deductible charitable contributions). If you are not sure whether the gift tax or the estate tax applies in your situation, please see CPA Orange County for advice.
Annual Exclusions vary each year, since we are currently in the 2016 year, our annual exclusion is $14,000. However, if you and your spouse own an item or property together, you are both entitled to the annual exclusion of $14,000 each, thus a total of $28,000 can be excluded.
Who should I hire to represent me and prepare and file the return? Since the IRS cannot make recommendations about specific individuals, there are several factors to consider:
– The complexity of the transfer
– The size of the transfer (in terms of dollar amount)
– CPA Orange County firms
People who make gifts as part of their overall estate and financial plan often engage the services of CPA professionals in Orange County.