Say you are a single person with no dependants, and you have a job paying, say, ten bucks an hour.
Someone gives you a cash gift in the low five figures. What percentage of this gift would you expect to pay in taxes?
Cash? Like a bunch of dead presidents?
Nothing.
Read and learn!
IRS FAQ on gifts will explain that:
unless it is less than $14,000 in which no tax is needed.
Ninjaed! But I am very sad as I wanted to ‘Quoth the Raven[man]’
Since the OP is asking a question which might have legal implications, we prefer that these be done in IMHO where opinions as well as factual answers are found. Moved.
samclem, moderator
Dang! You guys are fast! That is good news, thanks very much!
P.S. ** Disheavel:** Ha ha, I see what you did there.
The recipient of a gift never pays taxes on it. Period. No matter how large. Seems strange I know.
The person who gives the gift may have tax implications (that is where the earlier $14K figure comes into play).
So the answer to your question is $0.
And even for the giver, gifts in excess of $14,000 require filing a gift tax return which counts against the giver’s gift tax lifetime exemption amount, which is $5,250,000 in 2013. So the giver would’ve needed to give away quite a bit.
I thought it was $13,000. Hummmmmmmmm
Maybe it is 13 for a non taxable trust disbursement…
Anybody want to adopt me?
It was 13,000 for tax year 2012. It got an inflation adjustment to 14,000 for 2013.
As previously stated however, that is just the minimum amount a person must give to be required to file a gift tax return. Any amounts gifted above 14,000 (or double that if married and gift-splitting) would simply reduce your lifetime exclusion amount for estate/gift tax purposes, which is currently at 5.25 million by the excess above the 14,000 gifted to each individual.
I remember back when Oprah gave cars to her studio audience and some were whining about the taxes. Were those not gifts? Or were they considered prizes? Or something else?
Commissioner v. Duberstein - 363 U.S. 278 (1960)
We don’t have to worry about characterizing the cars. The tax code makes any accession to wealth taxable unless specifically excluded by the code. As long as no exception applied to the cars, they are taxable. Oprah gave the cars to the audience in the course of her business, which was creating an entertainment show and selling advertising time to sponsors. She gave out the cars to promote her show and create ratings. She was not motivated by affection, respect, admiration, charity, or like impulses.
Anyone who disagreed would be free to litigate the issue.