If you’re worried that receiving a gift of money means you’ll lose some of it to taxes, you can rest easy. The IRS does not consider gifts as income, even a gift of money, so you won’t have to claim your monetary gift on your tax return or pay income taxes on it. Although money is a taxable gift, it’s the giver of the gift who is taxed and not the recipient.
How Much Money Can I Receive as a Tax-Free Gift?
As the recipient of a cash gift, you can receive any amount tax-free. But there are tax-free limits for the givers of cash gifts. These limits are called exclusions, because the gifts are excluded from being taxed. The good news is that the maximum gift exclusions are fairly hefty, which means that someone who gives you a monetary gift can be quite generous without incurring a tax penalty.
- Annual Exclusion. For the 2017 tax year, individual taxpayers can give up to $14,000 to each person in a single year without having to pay taxes on the gift. Married taxpayers can give up to $28,000 collectively ($14,000 each) to each person on their gift list without having to pay taxes on their gifts. There is no limit to how many people you can gift this tax-free money.
- Lifetime Exclusion. During an individual taxpayer’s lifetime, the IRS extends a $5.49 million tax-free limit on monetary gifts. The amount is doubled for married taxpayers, with a $5.49 million limit allowed for each spouse. This tax-free gift allowance is separate from the annual exclusion; for example, only amounts over $14,000 that are given to one person begin accruing toward the lifetime limit.
- Unlimited Exclusion. Some monetary gifts are exempt from the exclusion limits, which means that you can receive an unlimited amount of money tax-free from the giver. The instructions for IRS Form 709, “United States Gift (and Generation-Skipping Transfer) Tax Return lists these allowable gifts and the conditions placed on them. For example, someone can pay your qualifying medical bills without having to pay a gift tax if she makes payments directly to your medical provider.
How Much Money Can My Spouse Give Me as a Tax-Free Gift?
Even better news here. If you're a U.S. citizen, your spouse can give you an unlimited amount of money as a tax-free gift. If you're not a U.S. citizen, your spouse can give you up to $149,000 tax-free if the amount over the annual exclusion of $14,000 ($135,000) qualifies for the gift tax marital deduction. These qualifications are listed in Form 709.
Video of the Day
If you personally receive gifts of money for your IRS-qualified charitable organization, the money is subject to the IRS exclusion limits because the money is given to you directly. But if you ask your contributors to give directly to your charity instead of paying you on behalf of the charity, they can list their gifts as deductions on their tax returns. You can find a list of IRS-allowable charities, such as The American Red Cross and The Salvation Army, in IRS Publication 526, "Charitable Contributions."
- Thomas Northcut/Digital Vision/Getty Images