Did you know that there might be tax consequences to your kind gesture?
Federal gift taxes can be confusing because of our country’s ever-changing tax policy. When you give cash or property to an individual, the gift is not taxable to that person. However, depending on how much you give, you may need to file a return and pay gift tax.
The IRS allows you to give each individual up to the annual exclusion during the year without requiring you to report the gift or file a gift tax return. In 2013, that amount is $14,000. In addition, certain gifts do not count towards the annual exclusion, such as amounts paid directly to qualifying educational institutions for tuition, or amounts paid directly to the person or a medical organization for medical expenses (including health insurance).
If you give more than the annual exclusion to any one individual during the year, you must file a gift tax return to report the taxable gift. Your gift will be taxable to the extent the amount given exceeds the annual exclusion. However, throughout your lifetime, you can give up $5,250,000 (2013 amount) before you are required to actually pay any gift tax.†
Still confused? We’d more than happy to help you navigate your business through the IRS’ paperwork and policies. Why not give us a call at (877) 630-4722 or contact us via email and let’s see how we can help you protect and Grow Your Business!