It seems there’s always a catch when handling substantial sums of money, and it can be easy to trigger flags when you didn’t mean to. If you plan on distributing monetary gifts anytime soon, it can help to educate yourself to avoid any accidental run-ins with the IRS. Learn more about paying taxes on monetary gifts before reaching out to the professionals at A. Roberts & Associates for tax services near you!
You may need to pay taxes on monetary gifts that you give, but only if you hit a certain limit. This limit is subject to change each tax year, and you may only be taxed on the amount that you go over. Let’s take a look at some examples:
Understanding What Counts As A Taxable Monetary Gift
Taxes that you owe on a monetary gift can also be defined as a “gift tax”. The recipient will have no responsibilities or obligations regarding taxes, but the gifter will need to claim it when filing their taxes. As the gifter, it’s not always guaranteed that you will need to pay a gift tax even if the amount you give is over the annual limit.
| Who Pays The Gift Tax? When receiving a large sum of cash, it’s only natural to think that you will have to owe something for accepting such a high amount. But in this case, it’s typically the one giving the monetary gift who is required to pay. |
Calculating The Amount Of Taxes For Monetary Gifts
Now that you understand how filing for gift tax works, what is the limit you’re allowed to give before it needs to be taxed? You’ll be glad to know that the limit has already increased at the time of writing this guide, going up from $16,000 last year to $17,000 this year. If you’re married, you and your spouse don’t need to share this limit. You each get to gift the full amount as individuals, essentially doubling the money that you are able to give.
As far as tax percentage goes, that depends on the individual. Gift tax can range anywhere from 18% to as high as 40%. This percentage can make a huge difference which is why it’s always best to consult a financial advisor before following through with your monetary gift.
As The Gifter: How To Gift Money Safely
Nothing is more frustrating than spending many years planning for your loved one’s future just to find out that you’ve been going about it the wrong way. For instance, it’s not a good idea to stockpile large amounts of money over a long period of time to gift all at once, lest you lose a good chunk of it to taxes. If you plan on giving away the money anyway, it’s best to gift the maximum amount before reaching your limit each year to negate the need for paying gift taxes entirely.
As The Recipient: The Best Uses For Your Monetary Gift
If you’re on the receiving end of a monetary gift, you might be excited to spend it immediately however you wish. Although that money is technically yours to do with as you please, it pays to be smart and vigilant. You can use that money to build a respectable investment portfolio so you can watch your savings grow. For guidance on how to properly invest your money, reach out to your local and trustworthy financial advisors!
Gift Smart. Consult A. Roberts & Associates! Avoid making any wrong moves that could affect your taxes! Contact A. Roberts & Associates today to schedule a consultation so you can be smart ab