Gift Tax Question

[allanb]

I am in California, my wife and I are thinking about gifting our Daughter $19,000. I can't quite wrap my head around the tax issue. I realize that we have to pay the taxes on it, but was wondering, does it make any sense to have our daughter write us a check back for the amount of tax we will pay on it. For example if we are in the 12% tax bracket, the tax amount would be $2,280. Does it make any sense to have our daughter give us a check for this amount, thus reducing our tax liability, even though it obviously lowers the actual money she receives form us at the end of the day. Also, if this does make sense, do I have to report the $2,280 that we receive from our daughter on my tax return. BTW: she definitely could use the help. Thanks in advance, Al

 

[Mark_A]

I am in California, my wife and I are thinking about gifting our Daughter $19,000. I can't quite wrap my head around the tax issue. I realize that we have to pay the taxes on it, but was wondering, does it make any sense to have our daughter write us a check back for the amount of tax we will pay on it. For example if we are in the 12% tax bracket, the tax amount would be $2,280. Does it make any sense to have our daughter give us a check for this amount, thus reducing our tax liability, even though it obviously lowers the actual money she receives form us at the end of the day. Also, if this does make sense, do I have to report the $2,280 that we receive from our daughter on my tax return. BTW: she definitely could use the help. Thanks in advance, Al

Why do you think you or anyone has to pay gift taxes on a gift of $19,000? That amount is exempt from IRS gift taxes per year, per person. In fact, you and your wife together can give your daughter $38,000 per year without paying a gift tax.

 

[adjusterjack]

Neither you nor your daughter pay tax on the gift. The $19,000 or $38,000 is the threshold beyond which you would have to file a gift tax return. But there would still be no tax unless you exceed the lifetime gift tax exclusion.

It's really quite simple.

Read:

https://www.kiplinger.com/taxes/gift-tax-exclusion

 

[Taxing Matters]

I am in California, my wife and I are thinking about gifting our Daughter $19,000. I can't quite wrap my head around the tax issue. I realize that we have to pay the taxes on it,

I'm going to stop you there because your assumption that you have to pay tax on it is incorrect. If either of you give her gifts during that total more than $19,000 then the one who made those gifts must file a gift tax return. As a result, you and your wife may each give her up to a total of $19,000 in gifts this year and not have to file a gift tax return or pay any gift tax.

If one of you gives her more than $19,000 in total gifts during 2025 then that person would have to file a gift tax return. The amount over $19,000 is known as a taxable gift. But no actual gift tax is paid on that taxable gift until you have exhausted the lifetime unified credit against gift and estate taxes. As of this year that credit allows you to pass up to $13,990,000 in taxable gifts without paying any gift or estate estate tax. Whatever amount of the unified credit you have left when you die is available to your estate to use as credit against the estate tax. Until you've given away that much in taxable gifts all you do is file the gift tax return to report taxable gifts which results in your unified credit amount. Thus between the two of you can make taxable gifts of nearly $28 million over the course of your lives and not owe a penny in gift tax.

If the gift comes from just one of you and it exceeeds the $19,000 exclusion you may file gift tax returns to split the gift between you which treats each of as having made half the gift.

It's possible the law could change this year that would change the numbers but its very unlikely that the unified credit will drop drastically. As a result unless you think you'll have the money to be making millions of dollars in taxable gifts over your lifetime you are unlikely to ever have to pay gift tax. You'd just file gift tax returns for the years when your total gifts given to one particular person exceeds the annual exclusion amount ($19,000 for this year) and keep track of how much of your unified credit you've used up.

 

[zddoodah]

You generally do not pay income tax

This thread is nearly a year old. The situation was resolved LONG ago by the posters who thoroughly answered the question last year.

 

[quincy]

birib has been reported to the moderator. S/he has repeatedly revived old threads despite being told several times not to.