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Gifts and Taxes

Not all gifts are taxable.Gifts that fall into the following categories are not taxable:

  • Gifts that are not more than the annual exclusion for the calendar year (in 2022, this is $16,000)
  • Tuition or medical expenses you pay for someone else
  • Gifts to your spouse. Married couples may take advantage of a “gift splitting” tax rule and give up to $30,000 combined without incurring tax penalties
  • Gifts to a political organization

If a gift is taxable, the donor is usually the one who pays the gift tax unless the gift recipient makes an arrangement to pay it.

As of 2022, the IRS says that the annual exclusion on a gift per person per year is $16,000. This means the donor will have to pay taxes and file a gift tax return on any amount above that. For example, if someone gives you $25,000, they will have to pay taxes on the amount over the annual exclusion, which is $9,000 in this case.

Lastly, be aware that even if gift amounts fall within the IRS gift exclusions and exemptions, donors will still need to file a tax return so their donations can be counted toward their lifetime tax exemption.