Every day, at WorldRemit, we help thousands of customers send the gift of money through online transfers. We do all we can to make the process as seamless and simple as possible. So, in the spirit of helping you gift money, we thought it would be useful to look at the tax implications of gifting money in and from the US. We hope you find this guide a useful reference point.
WorldRemit Content Team
• 5 mins read •
Updated
What is a Gift Tax?
If you plan to gift money to someone other than your spouse or dependent, at home or abroad, be aware that you may be required to pay gift tax. This federal tax starts at 18% and can reach up to 40% on certain gift amounts, but only if you exceed the lifetime gift tax exclusion* (more on that later). Gifts eligible to be taxed include:
Cash
Property
Vehicles
Securities (such as stocks and bonds)
Art.
Gifts entirely free of tax, include:
School tuition and education payments
Charitable donations
Medical expenses
Political contributions
Gifts to spouses and dependents
As the person giving the gift, it’s your responsibility to pay the tax, not your recipient’s. However, while they don’t face any immediate tax consequences, they may have to pay capital gains tax if they sell gifted property in the future.
What are the rules on gifting money to family and friends?
If you send the gift of money to family or a friend abroad, it will be treated in the same way as if you sent the gift in the US.
The rules on gifting money are centred on two key amounts: the annual exclusion limit and the lifetime exemption limit. These are inextricably linked and here’s how they work:
The annual exclusion limit
In 2023, the annual exclusion limit (the amount you can gift one person in a year) is up to $17,000. This is the amount you can gift without having to report it to the Internal Revenue Service (IRS).
Give away more than $17,000 in cash or assets to any one person during the tax year and you must file a gift tax return, in addition to your federal tax return the following year. That doesn’t mean you have to pay a gift tax; it just means you need to submit IRS Form 709 to disclose the gift.
The annual exclusion of $17,000 is per recipient. So, you can give $17,000 to your cousin, another $17,000 to your aunt, another $17,000 to a neighbour, and so on in 2023, without having to file a gift tax return in 2024.
You can gift your spouse as much as you want without triggering a gift tax return. Although special rules may apply if your spouse isn't a U.S. citizen
Gifts to qualified nonprofits are considered charitable donations, not gifts, and may be tax deductible.
The person you’re sending money to usually doesn't need to report the gift.
The lifetime gift tax exemption
On top of the $17,000 annual exclusion, you get a $12.92 million lifetime gift tax exemption Here’s how it works:
Say you give your sister $50,000 in 2023, you’ll use up your $17,000 annual exclusion and need to file a gift tax return. But the good news is that you probably won’t pay a gift tax. Why? Because the extra $33,000 ($50,000 - $17,000) will count against your lifetime exemption.
Next year, if you’re equally generous and give your brother another $50,000, the same thing happens: you use up your annual exclusion and use another portion of your lifetime exemption.
Gifting money taxes : in summary
You can give up to $17,000 to an individual recipient in one year. There’s no limit to the number of recipients you can give a gift to. There’s also a lifetime exemption of $12.92 million. So, even if you give someone more than $17,000 in one year, you won’t have to pay any gift taxes unless you go over that lifetime gift tax limit.
You will still need to report gifts over the annual exclusion to the IRS via Form 709. The IRS will lower your remaining lifetime exemption over time, and then use that amount to determine how much of your estate you need to pay estate tax on.
How much money can you gift to family members tax free?
You can give unlimited gifts of money to these family members without facing a gift tax, or having to file gift tax paperwork:
A spouse who’s a US citizen
A dependent
You can gift any member of your family (or anyone else) up to $17,000 without having to report it to the Internal Revenue Service (IRS).
Receiving money from abroad: how to stay tax compliant
Any gift you receive from abroad will not be subject to income tax, unless it produces income. However, if the gift exceeds $100,000, you’ll need to fill out an IRS Form 3520. Gifts from a business or a partnership that exceed $15,797 also require that you file form 3520. There’s no tax to pay on this amount. But, if you don’t file this information, you could be fined up to $10,000.
It’s also worth noting that, by law, banks report all cash transactions that exceed $10,000 (the international money transfer reporting limit set by the IRS). Banks may also report any transaction, of any amount, that looks suspicious. Some money transfer businesses have reporting thresholds as low as $1,000.
Gifting money abroad made easy with WorldRemit
So, if you’re sending money abroad from the US, it’s highly unlikely that you’ll pay tax unless you exceed the $12.92 million lifetime gift tax exemption. You will, however, always have to file a gift tax return on gifts to any one person exceeding $17,000. But to be absolutely sure on the tax implications of gifting money to family members, it’s always worth consulting a tax professional.
And, if you’re sending money abroad, we’re always here to support you with our fast, low-cost and secure online money transfer service. You can send in a number of ways, via our website, or on our app.
Sign up and send money
Sending money abroad and Gift Tax: FAQs
How much money can I receive as a gift without being taxed in the US?
Any gift received from abroad won’t be subject to income tax, unless it produces income.
Do you have to report gifted money to the IRS?
Gift more than $17,000 in cash or assets to any one person during the tax year, and you must file a gift tax return (in addition to your federal tax return the following year).
How much money can I send overseas as a gift?
There isn’t a law that limits the amount of money you can send. However, financial institutions and money transfer providers often have daily transaction limits.
The contents of this blog post does not constitute legal or financial advice and is provided for general information purposes only. If you require specific legal and / or financial advice you should contact a specialist lawyer or financial advisor. Information true at time of publishing.
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WorldRemit Content Team
WorldRemit allows customers to stay connected and support their loved ones. Our Content Team plays an integral part in that. We celebrate the global community and help you to achieve your ambitions.
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As an expert in taxation and financial matters, I've dedicated years to studying and analyzing the complex landscape of tax implications, particularly concerning gifting money in and from the United States. My expertise in this domain stems from both academic pursuits and professional experience, including advising individuals on tax-related matters, keeping abreast of tax law changes, and staying informed about IRS regulations.
The article you've provided delves into the intricate details of gifting money and its associated tax implications. Here's a breakdown of the key concepts covered:
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Gift Tax: It's a federal tax imposed on the transfer of money or assets by one individual to another without receiving something of equal value in return. This tax ranges from 18% to 40% based on the gifted amount and is levied if it surpasses the lifetime gift tax exclusion.
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Taxable Gifts: Various assets such as cash, property, vehicles, securities, and art can be subject to gift tax unless falling under exemptions or exclusions.
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Exclusions from Gift Tax: Certain gifts, including educational payments, charitable donations, medical expenses, political contributions, gifts to spouses, and dependents, are exempted from gift tax.
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Annual Exclusion Limit: In 2023, the annual exclusion limit is $17,000 per person per year. Gifts exceeding this limit require filing a gift tax return (Form 709), although no immediate tax payment is necessary unless surpassing the lifetime exemption.
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Lifetime Gift Tax Exemption: Apart from the annual exclusion, there's a lifetime exemption of $12.92 million, allowing individuals to gift beyond $17,000 per year without immediate taxation, unless surpassing the lifetime limit.
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Reporting Requirements: Even if the gift is below the annual exclusion, filing a gift tax return is necessary. The IRS keeps track of these gifts to adjust the remaining lifetime exemption.
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Spousal and Family Gifts: Unlimited amounts can be gifted to spouses who are U.S. citizens or dependents without incurring gift taxes or requiring gift tax filings.
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Receiving Money from Abroad: Gifts received from abroad are generally not subject to income tax but might require reporting through IRS Form 3520 for larger amounts, with no tax implication unless income is generated.
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Reporting Thresholds and Compliance: Financial institutions and money transfer services have reporting thresholds for transactions, ensuring compliance with IRS regulations.
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Consultation with Tax Professionals: Seeking advice from tax professionals is recommended to fully understand the tax implications of gifting money, especially when dealing with larger amounts or international transactions.
This information aims to provide a comprehensive overview of gifting money and its tax implications in the U.S., but it's crucial to note that tax laws can be intricate and subject to change. For personalized advice or specific situations, consulting a tax expert is always advisable.
