The general rule that any gift, money or property, is taxable under federal gift tax has a few exceptions that make the gift nontaxable. For example, gifts that are within annual exclusion of $14,000, gifts that are expenses paid directly to a medical or education institution, gifts to spouses, gifts to a political organization and to charities are nontaxable. The recipients will neither be taxed under federal gift tax nor will they be taxed under income tax on the value of the gift. For procedures, some taxpayers need to file Form 709.

See IRS Tax Tip 2015-51, “Seven Tips to Help You Determine if Your Gift is Taxable,” April 1, 2015.

Posted by Jiaqi Wang, Associate Editor, Wealth Strategies Journal.