Know what gifts are taxable

When an individual receives a gift, whether cash or property, the gift is generally not taxable to that individual. Sometimes, however, the gift giver may incur a gift tax liability when making certain gifts. If you make a gift to family members or other individuals, you can give $14,000 or less in value to a single individual during the year

and you do not have to report the gift or file a gift tax return. The so-called "annual exclusion" of $14,000 simply means that gifts during the year to an individual that are equal to or below this exclusion amount are not considered reportable gifts.

Certain gifts for medical expenses and educational expenses do not count toward the $14,000 exclusion and allow you to maximize your gifts for the year. For medical expenses, amounts you pay directly to the person or organization providing the medical service or care are excluded from the gift tax. To qualify for the exclusion, the medical expenses must meet the requirements for deductibility and generally include expenses paid for diagnosis, cure, mitigation, treatment, or prevention of disease. It also includes amounts paid for medical insurance.

With regard to educational expenses, similar rules apply. Transfers made to qualifying educational institutions for tuition are not subject to the gift tax and do not count toward the $14,000 annual exclusion. The exclusion applies to tuition for full or part-time students paid directly to the educational institution. Amounts for expenses such as books, room, board, or other supplies are not eligible for the exclusion.

Gifts made during the year that exceed the annual exclusion are considered "taxable" gifts and are required to be reported on a gift tax return. You are allowed a lifetime exclusion of $5 million in taxable gifts before any out-of-pocket gift tax is actually due.

Tax Tips Small Business

  • New Rules for Spouses Who Operate a Business Together

    Do you qualify for simplified reporting?

    Spouses who operate a business together have a new option for reporting their business income. In the past, husband and wife joint owners were considered a partnership for reporting purposes. New rules, which took effect in 2007, give spouses the option of reporting their business income as two separate sole proprietorships.

    Read more ...

Small Business Quick Tip

  • Business Mileage Rate

    Instead of deducting the actual expenses for the business use of your vehicle, opt for the standard mileage rate. In 2016, you can deduct 54 cents for each business mile you drive.
Friday, 22nd February 2019
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Tax Tips Personal

  • Cleaning Out Your Closets?

    Items you donate may not qualify for a deduction

    It used to be that you could take all your unused clothing and household items to the local Goodwill, Salvation Army, or thrift store and reap a nice charitable contribution deduction.

    Read more ...

Personal Quick Tip

  • IRA Contribution Deadline

    If by year-end you haven't contributed funds to your 2016 IRA, or if you've put in less than the maximum allowed, don't worry. You can contribute to either a traditional or Roth IRA until the April due date for filing your tax return for 2016 not including extensions. You can contribute up to $5,500 to your IRA each year. If you are age 50 or older, you are allowed to contribute an additional $1,000.