Indianapolis estate planning attorneys are often asked questions about the tax ramifications of giving and receiving gifts.
If you receive a cash gift from someone is this income considered to be taxable under IRS regulations?
The answer to this question is no with an asterisk of sorts.
You don’t have to claim the face value of a cash gift. But if you were to receive an appreciable asset such as a certificate of deposit you would be liable for the earnings above and beyond the face value of the original gift.
On the surface it may seem as though only the recipient should have to consider the possibility of taxation. But when you are examining the subject of taxation as it applies to gift giving you do have to take a look at the giver of the gift.
When you give someone a gift you are passing along resources that you have left over after paying taxes on your earnings. For this reason many people feel as though it is unfair, but there is a federal gift tax in place nonetheless.
You can give gifts totaling as much as $13,000 per person to any number of individuals during a given year free of the gift tax. But after you exceed this exemption you are going to be exposed to the gift tax and its 35% rate (55% in 2013).
There is a lifetime unified gift/estate tax exclusion that can be used to give gifts tax-free above and beyond $13,000 per person in a given year. But, your available estate tax exclusion will be reduced by the amount of these gifts and this is something to keep in mind.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.