A gift from family

[drikkity]

What is the name of your state? Ohio

My father recently passed away. My mother has received a generous amount of money from his retirement fund as well as insurance policies. To try to help my brother and I with our financial situations she decided to give us each a gift of $20,000. After receiving said gift I was informed by someone that we would have to pay a gift tax and unearned income tax. Is this correct? How much will each of us be liable for?

 

[LdiJ]

What is the name of your state? Ohio

My father recently passed away. My mother has received a generous amount of money from his retirement fund as well as insurance policies. To try to help my brother and I with our financial situations she decided to give us each a gift of $20,000. After receiving said gift I was informed by someone that we would have to pay a gift tax and unearned income tax. Is this correct? How much will each of us be liable for?

Any gifting in excess of 15,000 per year, per person requires the gifter to file a gift tax return. The gifter does not actually have to pay any taxes on gifts until they have used up their lifetime exclusion for gifting, which right now is around 11 million dollars.

It would have been easier if your mother had gifted you 15k or less now, and the rest next year, but at least she will only be out the cost of filing a gift tax return. You and your brother won't pay any taxes on the money at all.

 

[adjusterjack]

The form:

https://www.irs.gov/pub/irs-pdf/f709.pdf
The instructions:

https://www.irs.gov/pub/irs-pdf/i709.pdf
She files it with her 2019 tax return.

It's not as complicated as it looks.

 

[LdiJ]

The form:

https://www.irs.gov/pub/irs-pdf/f709.pdf
The instructions:

https://www.irs.gov/pub/irs-pdf/i709.pdf
She files it with her 2019 tax return.

It's not as complicated as it looks.

The bolded is incorrect. Its a separate return that is filed by itself. You do it in the same time frame as your regular tax return, you just don't do the two together.

 

[Taxing Matters]

What is the name of your state? Ohio

My father recently passed away. My mother has received a generous amount of money from his retirement fund as well as insurance policies. To try to help my brother and I with our financial situations she decided to give us each a gift of $20,000. After receiving said gift I was informed by someone that we would have to pay a gift tax and unearned income tax. Is this correct?

The other replies have addressed the federal gift tax. I'll mention the part they didn't — there is no such thing as a federal or Ohio "unearned income tax." Receiving a gift is not income for either federal or Ohio income tax either. The only tax to be concerned about here is the federal gift tax.