Did you get any exciting gifts this holiday season? What’s not so exciting are the tax implications that may come with them. We often get questions about those implications this time of year so let’s take a look at some of the most common tax myths about gifts.
Christmas is over and you might have even gotten all the tinsel out of the house by now, but that doesn’t mean you’re done giving gifts. It’s likely you’re just now turning to the largest “gifts,” as your think about taxes and your estate plan. To that end, an article about the “5 Common Tax Myths About Gift Giving” came out recently in Forbes.
Myth: You have to pay taxes on gifts that you receive. False. You pay gift taxes on the gifts you give, not on what you receive. The reason for the gift tax is to keep people from avoiding the estate tax by simply “giving” it away while they are alive. Accordingly, the person that does the giving accepts the tax liability. (That said, the receiver may then owe other taxes since they now own the assets, but that’s all in the course of ownership).
Myth: You pay a tax on gifts you make that are over $10k. This is not entirely true since there are a number of other factors. For starters, the amount is now closer to $13k worth of gifts in a year. However, gifts to spouses (so long as they are citizens) and approved charities don’t count against that limit. If you do exceed that amount, it will first count against your lifetime exemption of $5 million. Remember to file a gift tax return with your 2011 income tax filing.
Myth: You can give freely by offering them as loans and then forgiving the loans. False, the IRS is out in front of you on that, too. Loans are loans anad gifts are gifts. Should the IRS feel you’re treating a loan as a gift, it will consider it as such.
Myth: Charitable deductions can always be deducted against your taxable income. Not quite. First, charitable deductions can only be claimed if the IRS recognizes the charity as a charity. Second, you can only deduct the effective amount given. So, if you receive anything of value in return, then such value counts against the value of your charitable contribution (e.g., a $100 gift is only a $60 charitable deduction, if you receive a $40 steak dinner in return).
Finally, one other myth is that you need not worry about how your home state treats gifts, independent of the IRS. No, each state has its own quirks regarding deductions and ownership.
For that matter, too, it’s worth noting that these amounts and rules are subject to evolving tax law which is in the cross hairs of 2012 politics and may, therefore, change within a year.
Reference: Forbes (December 27, 2011) “5 Common Tax Myths About Gift Giving”
On August 20, lets give Demi an aznmiag birthday present she can never forget. Watch Skyscraper on VEVO at least once and try to get her the most watched video of the year for the most inspirational song of our lives. Copy and paste this to her other videos and thumbs up so we can get the word around.WE LOVE YOU DEMI AND WERE SO GLAD YOURE HEALTHY AGAIN! Love You Demi And Too Me You Were Never Gone..Love You Always Be A Fan.
Posted by: Luis | 02/12/2012 at 01:10 AM