gift

california,my inlaws want to gift us $100,000. who will pay taxes on it.

[ShyCat]

The giver is responsible for gift taxes, not the receiver.

I thought for sure we'd get popped for income, or something like that! If the gifterwrite's the check before the end of this year do we pay tax on it next year?

[abezon]

*You* never pay taxes on the $100,000. However, you pay taxes on the interest you earn on the money once you receive it. For best results, your inlaws should give you & your spouse $44,000 before Dec 31 and the rest after Jan 1. The annual gift allowance is $11,000 per receipient per donor. Thus, each inlaw can give you $11,000 and give your spouse $11,000.

They will have to file gift tax returns (Form 709) for next year's gift, but only $12,000 will be a "reportable gift". [$100k - 44k this year - 44k next year = $12k] They won't pay any actual taxes on the $12k gift because their 'unified estate & gift tax credit' of $1M will cover the $12k. When they pass away, their estates will have a unified credit of $1M - $6,000 each.

If you have kids, and the gift is intended to be for their college, they can each give each child $11,000. They can also give the money by investing it into a section 529 plan. A 529 plan is like a Roth IRA for college -- the money is tax free when taken out as long as it's used to pay for college tuition, books, supplies, or room & board. Their financial advisor can help them choose a 529 plan (each state has one, but you can choose any college no matter where your 529 plan is). The other advantage of a 529 plan is that the kids can't decide they want to buy a car with the money instead of paying tuition.