Gift taxes: Clearing up the confusion

There is a great deal of confusion about gifting and gift taxes. The federal gift tax law is completely apart from the income tax law. Neither party to a gift should include the gift information on their income tax return. The gift is not tax-deductible by the one giving the gift, and it is not taxable income to the one receiving the gift. But a gift tax return may need to be filed.

So, who has to file a gift tax return? The gift tax applies to the transfer of money or property from one individual (the donor) to another (the donee). If a gift tax return is due, it is filed by the donor.

Certain gifts are not taxable and do not require the filing of a gift tax return, including the following:

*Gifts in 2012 of $13,000 or less per person to any number of people are not taxable. That limit increases to $14,000 in 2013.

*A payment for another’s tuition made directly to an educational institute.

*A payment for medical treatment of another made directly to the medical facility.

*Unlimited gifts made to one’s spouse (there is a dollar limit if the spouse is not a U.S. citizen).

If you make taxable gifts, a Form 709 is due by April 15 of the following year (the same due date as your federal income tax Form 1040). But don’t panic, you probably won’t owe gift tax. In addition to the above exclusions, you have a lifetime exemption — in 2012 the exemption is $5,120,000. This exemption is scheduled to drop to $1,000,000 in 2013 unless Congress acts to change the law.

If you make gifts beyond the above exclusions, please contact us for assistance.

About Brenda J. McGivern, CPA

Brenda McGivern started her own certified public accounting and management consulting firm in October 2001. The full service CPA firm provides tax and accounting solutions to meet the needs of today's small business and individual. Brenda McGivern has become a trusted advisor and valuable resource her clients rely on for timely, accurate assistance when they need it. Before starting the firm, she worked as an accountant for three years at a local firm and prior to that five years at a large international CPA firm in Boston. She has performed the following tax services: federal, state and local tax planning, international tax planning, estate and succession planning, mergers and acquisitions, capital retention and IRS representation. She has also coordinated assurance engagements, such as financial statement audits, reviews and compilations from the planning phase through the reporting phase. She has prepared and reviewed regulatory filings for numerous regulatory agencies including the Security and Exchange Commission. Prior to these positions she was selected from over 2,000 candidates into an eight-person intensive financial management program at an international technology company. The program consisted of graduate level classroom study and two six-month rotational assignments in financial operations. She graduated cum laude from the University of Massachusetts at Amherst and holds a Bachelors Degree in Business Administration with a concentration in accounting. McGivern also holds a license in Massachusetts as a Certified Public Accountant and is a member of the American Society of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants. She resides in Stoughton, Massachusetts with her husband Brian, and their sons Sean, Ryan and Conor and their dog, Davis.
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