Everything has a price and depending on the demand or need, some of those prices can grow or decrease substantially but the value of something is entirely different. Value, is the amount someone believes that a particular item may be worth to them. Instead of looking at price, a product of worth and effort in getting rid of an item or subject, the value is significantly important and used in a variety of methods, including by the federal government to institute a tax on items of large value or cumulative gifts given to another person throughout the tax year.
The family dynamic is likely a most common cause for a gift exchange but there are a variety of other scenarios which can constitute a gift and resulting tax implications. Although, gifts from one individual to their spouse are typically not counted, sometimes cases exist where gifts to your spouse are taxable
. In these situations, the tax would apply to one spouse and may be counted against their return for the year depending on the amount and reasoning behind the gifted money.
Gift Tax Changes
Changing for the 2018 tax year, gift tax maximums have been raised allowing individuals to award monies to other parties at an increased rate. Until this year, the maximum allowable gift amount was set at $14,000 before the gift tax began to be applied. Beginning with this tax year, a $1,000 increase was added increasing the amount of money allowable to be distributed without the tax penalty.
Individuals or groups who are giving money to another party are responsible for paying the amount incurred from a gift tax but recipients may also be subject to paying, depending on the particulars of a situation. Both parties may elect to split the tax applied for different reasons, but each component must be taken into consideration as every situation is going to be different and thus interpreted with varying degrees. Also, though the gift tax may be paid by the individual making a contribution, a recipient may then be subject to paying income tax on the money received depending on amount and their current tax situation.
Gift Tax Exemptions
There are a few exceptions to the gift tax adherence which according to the Internal Revenue Service (IRS)
will not count toward the application. These different payments, either to an individual or entity can be made without fear of any negative tax implications for the year.
As with almost any tax situation there are varying degrees to which the law may be interpreted but there are clear and coherent outlines in order for individuals to follow. Depending on your particular situation, seeking the advice of a trained professional who understands both how and why specific taxes make such a difference when applied can be critical to the success of your ability to execute a gifting transaction with the desired purpose being administered.
If you need any assistance in determining an appropriate course of action for gifting funds or should you be on the receiving end, the accounting experts at Bloch, Rothman, and Associates
will be pleased to assist you. Our associates can help ensure your tax requirements are met appropriately and distributed in a timely manner. Known for also providing payroll assistance, they can help with a variety of accounting, bookkeeping and essentially any aspect on either the individual or business level. Whether you need an explanation for a random tax form, are potentially in need of appropriate representation in tax court, or could use help in potentially a variety of other various services our tax experts are ready and willing to assist. Call 303-321-7160 or contact us
for your initial free no obligation consultation.