Do Cash Gifts Count as Income?income, tax tips | January 12, 2017 | By Susannah McQuitty
As an adult, family and friends get you gift cards and cash as presents a heck of a lot more than when you were a kid. We don’t really wear our wish lists on our sleeves anymore, and let’s be real – cold, hard cash is a crowd pleaser.
It would make sense, then, to guess that you raked in a good bit of dough throughout 2016: Christmas just passed, and who doesn’t get gift cards and money on birthdays? (You can always count on Great Aunt Judith to come through with the cash.)
So what happens when it’s time to file your taxes? Right as you’re about to pull the trigger and send off your return, it hits you: What about all that cash? Are you going to owe money for sweet Great Aunt Judith’s $20 gift?
Don’t sweat it if you didn’t give it
Good news if you’re the recipient – any money given to you as a gift doesn’t count as income on your taxes, so you don’t owe anything on it. Hallelujah!
That also goes for the extra bucks you got from Mom for gas, the $40 gift card to your favorite restaurant sitting snug in your pocket, and the $100 your friends pulled together when your tire blew out at school.
The giver may not have to sweat it, either
Whoever gave you the money is the only one who could be subject to the tax, but here’s some more good news: The giver doesn’t have to report the gift on their taxes unless it exceeds $14,000. If the gift is under $14,000 (which is, if we’re honest, pretty likely) there’s no need to fill out a gift tax return.
In case the gift does exceed the cap, all the giver has to do is fill out an extra form on their return – Form 709, to be exact – and no extra tax is owed from the gift until the giver exceeds their lifetime givings of 5.45 million. Yeah, million. So you’ve probably got a little elbow room before you have to worry about paying taxes on gifts.
Rule of thumb? Unless you have $14,000 gathering dust in your wallet and decide to gift it to an ol’ pal, or Aunt Judith gives you money for a 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.