Cash gifts can have tax implications
In recent months, various media reports have noted that a growing number of adult workers are moving back in with their parents, either to help make ends meet or in response to a job loss or some other significant financial setback.
Even people who don''t move back home may need a hand from their parents, and in some cases, such support may have tax implications when filing season rolls around.
For example, the Internal Revenue Service cites an annual exclusion of $13,000 per child for parents who want to give them cash gifts. The IRS adds that the donor is typically responsible for paying the gift tax, although arrangements can be made where the recipient pays the tax instead.
The IRS defines a gift as any transfer to an individual, directly or indirectly, where the money or its value is not received in return. There are also some exclusions from the gift tax, including gifts to one''s spouse, tuition or medical expenses paid on behalf of another, and gifts to a political organization.
For those who made cash gifts to their children or others last year but are unclear on the nuances of the law, consulting with a skilled tax preparer
is an advisable strategy.
Liberty Tax Service provides computerized income tax preparation and electronic filing. Each tax office offers customers audit assistance, a money back guarantee, and free tax return checking.