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roxanneblake

$50,000.00 gift

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3 hours ago, roxanneblake said:

Hello, my father and i have a joint checking account. He wants to give me a gift of $50k toward my mortgage. Since we share the same account, does this have to be reported

as a gift and taxed on the 36K? 

 

The way federal gift tax works is that you may give gifts totaling $15,000 each year to each individual without any gift tax consequences at all (it used to be $14,000 but went up to $15,000 for 2018 because of an inflation adjustment). Thus Becky could give this year gifts totaling $15,000 to Carol, another $15,000 to David, and $15,000 to anyone else she wanted without any requirement to report the gifts and no gift tax to pay.  This $15,000 amount is known as the gift tax exclusion. 

 

If you give someone gifts that exceed in total for the year more than $15,000 then the gifts that exceed the $15,000 gift tax exclusion is a taxable gift. For example, if Becky makes gifts totaling $50,000 to Fred in 2018, then she has made a taxable gift of $35,000 ($50,000 total gifts - $15,000 gift tax exclusion = $35,000 taxable gift). Once you have make a taxable gift to someone you must file a federal gift tax return (Form 709). 

 

The taxable gift first reduces your lifetime unified credit against federal and estate tax. For 2018 that credit is $11,180,000. It will go up each year with inflation, but unless Congress changes the law it will drop to something over $5.6 million after 2025. You reduce this credit with each taxable gift you make in your lifetime. Once the credit gets to zero, any additional gifts you make will result in actual gift tax to pay. If you don't use it all up during your lifetime then the credit you have left at death will be available to your estate to use for estate tax. 

 

This means that Becky's taxable gift of $35,000 will require her to file a Form 709 and reduce her unified credit if she has any left. She won't have any gift tax to pay though as long as her unified credit before this gift was at least $35,000. If it was less than that then some or all of the $35,000 will be subject to gift tax.

 

So unless your father has already made about $11.2 million of taxable gifts in his lifetime he would have no federal gift tax to pay. He'd just file the Form 709, reduce his unified credit, and that would be it. 

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