Someone gave me a large sum of money as a gift. Do I have to pay taxes on it?

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Question:

Someone gave me a large sum of money as a gift. Do I have to pay taxes on it?

Answer:

Usually the person that gives the gift (donor) is responsible for gift taxes. For example, if someone decides to give you $50,000 you will not have to pay taxes as a result of the gift. The person giving you the money will have to pay the taxes. However, there are guidelines to consider with any gift tax exclusion. Here is an overview of those guidelines.

You may not have to pay taxes for the money that is given to you. However, if  is something like stocks that can earn income, you are responsible for that income. It will have to be claimed on you annual return.

If someone is planning to give you a large amount of money, they should be aware of several factors. These factors may keep them from paying additional taxes.

  1. If donor is still married a gift can be made of twice the amount of the maximum. For 2010, that amount in $13,000. So one person may give an amount of $13,000, but together they can give you $26,000 without any tax owed.
  2. If the money is for tuition or medical expenses, it will not be considered a gift.
  3. You can give money to your spouse and it will not be subject to gift taxes. It can be any amount that you wish.
  4. When you give money to a political organization you are not responsible for taxes.

Summary

When someone gives you a large amount of money, you do not pay gift tax. However, a gift of stocks, for example, that can earn income, has to be claimed. Make sure that someone giving you money knows the gift tax exclusion rules. Any time that you are unsure, it is best to consult an attorney in the matter. He or she has the knowledge and experience to help you.

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