Do You Owe Taxes on That Gift?

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eHow Money Blog

Be forewarned. Even the Internal Revenue Service concedes that the gift taxes are “considered to be some of the most complicated in the Internal Revenue Code,” particularly if you plan to use gifts as an estate planning tool.

However, if you just want to spread a little bit of money around at a time, the rules are not so daunting.

First, the basic definition: A “gift” is any item of value that you transfer to someone that is not paid for, in full, either in money or in assets. The gift giver – not the recipient – generally pays the gift tax if any is due. But for every tax year from Jan. 1, 2009 through the time of this writing in 2012, you can give up to $13,000 to any individual gift-tax-free, and your spouse can give the same amount. You can each give gifts up to that limit to multiple individuals in the same year without any gift tax consequences.

You can give as much as you want to your spouse tax-free, and you can give more than the $13,000 exclusion amount to others without paying gift taxes on it if the gift is in the form of tuition or medical expenses, or if it’s a political contribution.

You generally can’t deduct the amount of a gift from your income taxes unless it’s a charitable contribution.

IRS Publication 960 outlines more details on the gift and estate tax codes, but if you want to donate amounts larger than the exclusion or if you want to give away hard-to-assess property or assets, you need to visit a tax professional with experience in the field to make sure you’re going about things in the most tax-efficient way.

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