Gift tax question

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Topic Author
Justinbc6
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Gift tax question

Post by Justinbc6 »

I've been looking at tables online but I can't find any that I totally understand.
So, I received a life insurance benefit a few months ago. I wrote a draft from the account opened by the insurance company for $40,000 to someone as a gift. From what I understand, I have to file a gift tax form, but I would like to know how much in taxes I will owe the IRS. Any help would be appreciated.
john94549
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Re: Gift tax question

Post by john94549 »

You do have to file a return, however, you are well under the lifetime exclusion, which is north of $5 million.

No tax.
Topic Author
Justinbc6
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Re: Gift tax question

Post by Justinbc6 »

Thanks John! I saw that number but wasnt sure how to interpret.
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abuss368
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Re: Gift tax question

Post by abuss368 »

Correct. You should file a return but you are the lifetime exemption. Perhaps you have a spouse as well and her annual exemption can be counted as well.
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talzara
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Re: Gift tax question

Post by talzara »

There are two numbers here. There is an annual exclusion of $14,000 per recipient. There is also a lifetime exclusion of $5.25 million per donor, shared with the estate tax, stated as a $2,045,800 credit (the tax on $5.25 million). These amounts are adjusted for inflation each year.

You gave a single gift of $40,000 to one person. Thus, you would report a $40,000 on the appropriate schedule, then subtract the annual $14,000 to get $26,000 of taxable gift. You would then calculate the tax on $26,000, which is $5,120. After applying the $2,045,800 credit, you then end up with $0 tax due.
Topic Author
Justinbc6
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Joined: Sun Sep 29, 2013 12:54 pm

Re: Gift tax question

Post by Justinbc6 »

talzara wrote:There are two numbers here. There is an annual exclusion of $14,000 per recipient. There is also a lifetime exclusion of $5.25 million per donor, shared with the estate tax, stated as a $2,045,800 credit (the tax on $5.25 million). These amounts are adjusted for inflation each year.

You gave a single gift of $40,000 to one person. Thus, you would report a $40,000 on the appropriate schedule, then subtract the annual $14,000 to get $26,000 of taxable gift. You would then calculate the tax on $26,000, which is $5,120. After applying the $2,045,800 credit, you then end up with $0 tax due.
Thanks for explaining. This can be confusing when you've never had to worry much about taxes.
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