The US Federal Gift Tax is probably the most misunderstood tax in the country. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.If the only gifts you made during the year are deductible as gifts to charities, you do not need to file a return as long as you transferred your entire interest in the property to qualifying charities, those gifts would qualify as itemized deductions. You also do not have to file a gift tax return to report gifts to (or for the use of) political organizations and gifts you made by paying someone’s tuition or medical expenses.
Based on these exceptions, making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax nor does the recipient of the gift have to pay tax on the gift. On your tax return you cannot deduct the value of gifts you make other than gifts that are deductible charitable contributions.
If the gift does not fall under one of the exceptions the federal gift taxis potentially imposed on the individual making the gift, not the recipient. For each calendar year in which you are liable for gift tax on gifts you made during the year, you must file a federal gift tax return to report to indicate that you are reducing your lifetime gift tax extension, which is the total amount you can give away over the course of your lifetime without having to pay tax on the gifts.
In 2018, the lifetime exclusion is $11.8 million and is indexed for inflation each year.
This is another Question ForMy Account. If you have a question, are planning to make a gift, or need personal income tax services in Clearwater, Largo, Dunedin, Oldsmar, Lutz or contact BAAP C.P.A. and let us show you the way!