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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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If we gave a vehicle to our granddaughter, could we take it

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If we gave a vehicle to our granddaughter, could we take it off our income tax return for this year?
Hello kallieann,

Basically you have given your granddaughter a gift. Gifts are never tax deductible unless they are donations made to a qualified charity.

In fact, if the value of the gift that you gave your granddaughter exceeded $13,000, you would need to report this by filing Form 709, Gift Tax Return.

First, if and when gift tax is ever due, it is paid by the donor and not by the recipient of the gift. However, under current regulations, each taxpayer is allowed to give gifts in their lifetime of up to $1 million before any gift tax becomes due. This is part of what is called the Uniform Tax Credit Act.

In addition to the $1 million lifetime exemption, each individual is allowed to give annual gifts of up to $13,000 to any number of individuals, and those gifts do not even apply towards the lifetime exemption, nor do they need to be reported. Gifts which exceed the annual exclusion of $13,000 must be reported by the donor by filing Form 709 with the IRS to report the value of the gift. However, no tax is actually due unless that donor has already reached his $1 million lifetime limit. The amount reported then reduces that donor's remaining lifetime balance that he may give in non-taxable gifts.

If this was helpful please press the Accept button. Positive feedback is also greatly appreciated.

Thank you kallieann.

Customer: replied 7 years ago.

So if we give her the car, we can basically take the value of the vehicle off our tax return for this year since it's part of the initial $1M?

 

Yes or no would be sufficient. And what line would we declare the gift on?

 

 

Hello again kallieann,

No, you can never deduct the value of any gift you gave unless you gave the gift to a qualified charity. Please read again my very first response to you, the very first paragraph.

Gifts that you give to friends or family are never allowed as a tax deduction to you.

The whole law surrounding the $1 million exemption simply means this -- you as a taxpayer may give gifts of up to $1 million in your lifetime without having to pay tax on those gifts. Obviously most taxpayers never come close to giving gifts of that much value. But if you ever would give gifts of more than $1 million, then you actually owe tax on the gifts you give. You never get to claim personal gifts as a deduction.



Customer: replied 7 years ago.

Thank you; that second reply made it perfectly clear.

 

So if we gave the vehicle to the Juvenile Diabetes Research Foundation like we planned, we could take that gift off on our tax return; depending on how much they're able to sell it for? Or its Blue Book value?

 

 

Hello again kallieann,

Yes, that is correct. If you donated the vehicle to a qualified charity such as the Juvenile Diabetes Foundation, then you can claim this as a deduction for a charitable contribution.

The rules for donations involving a vehicle state that you can only claim the amount that the charity was able to sell the car for. Once the charity sells the car, they should send you a statement within 30 days showing the amount it was sold for. That is the amount you may then claim as a deduction on your tax return.

If this was helpful please press the Accept button. Positive feedback is also apprciated.

Thank you kallieann, and let me know if you have more questions.
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