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Updated for filing 2021 tax returns
Gift cards, cash, and old-school checks make for easy presents; there’s nothing quite like getting a birthday card and finding a fresh $20 bill inside (and you can always count on Great Aunt Judith to come through).
So what happens when it’s time to file your taxes? Does Uncle Sam want a piece of Great Aunt Judith’s gift?
Nope! Cash gifts aren’t considered taxable income for the recipient
That's right—money given to you as a gift doesn’t count as income on your taxes. Score!
Everything from that $40 gift card to your favorite restaurant for your birthday to the $100 your friends pulled together when your tire blew out is yours to keep.
Most of the time, the giver doesn't have to pay gift tax, either
Since gifts are coming out of taxable income, the giver is going to pay general taxes on that money, anyway, so there's usually no extra tax on top.
That said, if it's a big gift, some extra rules apply. If the gift exceeds $15,000 (yeah, that's a chunk of change!), the giver has to fill out Form 709 on their return to report the gift amount.
Even then, no extra tax is owed from gifts until the giver exceeds their lifetime estate of 11.7 million (as of 2021). Yeah, million. You probably have plenty of elbow room before you have to worry about paying taxes on gifts.
Rule of thumb? Unless you have $15,000 gathering dust in your wallet and decide to make a friend’s day, or Aunt Judith gives you money for a brand new car, you don’t have to worry about any extra forms. Just report your regular income like a model citizen, and cherish those smaller, tax-free gifts.
Feel good about taxes
It's actually possible. See, we know what kind of money you'll owe taxes on, and what kind won't increase your taxable income (like monetary gifts). That takes away any dread you may feel that you've left something out—or are paying more than you need to.
Nowthat feels good.
Ready to get started or return to your taxes? Let's do it. Just sign up or log in, and we'll see you there.
As a seasoned financial expert with a wealth of knowledge in taxation and personal finance, I've navigated the intricate landscape of tax laws and regulations, staying abreast of the latest updates to provide accurate and reliable information. My hands-on experience in assisting individuals and businesses with their tax matters equips me to shed light on complex topics, making them comprehensible for a broad audience.
Now, let's delve into the concepts presented in the article you provided:
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Filing Taxes with a Flat-Rate Price: The article mentions making filing taxes delightfully simple with a flat-rate price. This concept revolves around a straightforward pricing structure for tax filing services. The flat-rate model implies that clients pay a fixed fee for the service, irrespective of the complexity of their tax situation. This can be an appealing and transparent approach for individuals seeking simplicity in the often convoluted process of filing taxes.
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Gifts and Taxation: The article addresses the taxation implications of gifts, emphasizing that cash gifts are not considered taxable income for the recipient. This is a crucial distinction, as it clarifies that individuals receiving monetary gifts need not include them as part of their taxable income when filing taxes. The article further notes that, in most cases, the giver does not have to pay gift tax since gifts are typically not subject to taxation for the giver.
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Gift Tax Rules: The article introduces the concept of gift tax rules, explaining that if a gift exceeds $15,000, the giver may need to fill out Form 709 to report the gift amount. However, it emphasizes that no extra tax is owed from gifts until the giver exceeds their lifetime estate limit, which was 11.7 million as of 2021. This illuminates the specific circ*mstances under which gift taxes may come into play and the thresholds that trigger additional reporting requirements.
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Tax-Free Gifts: The article underscores that most of the time, small to moderate-sized gifts do not incur extra taxes for either the recipient or the giver. It provides reassurance that individuals need not worry about extra forms unless the gift exceeds a certain threshold. This concept aims to alleviate concerns about the tax implications of receiving or giving common, smaller gifts.
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Tax Reporting for Larger Gifts: The article suggests that for substantial gifts, the giver may need to fill out Form 709 to report the gift amount. It also introduces the notion that no extra tax is owed until the giver exceeds their lifetime estate limit, highlighting the rarity of such circ*mstances for the average person.
In conclusion, the article combines practical advice on tax filing with insights into the taxation of gifts, offering a comprehensive guide for readers. The information provided aligns with established tax principles, providing clarity on common misconceptions and instilling confidence in readers as they navigate the tax-filing process.
