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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 a relative gives me 30k as a gift, how much should I expect

Resolved Question:

If a relative gives me 30k as a gift, how much should I expect to pay in taxes on it?
Submitted: 7 years ago.
Category: Tax
Expert:  Merlo replied 7 years ago.
Hello BG,

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 BG and let me know if you have more questions.

Customer: replied 7 years ago.
So this is saying that if I receive 30k as a gift, I will be allowed to keep the full amount and not pay taxes on it. Is that correct?
Expert:  Merlo replied 7 years ago.
Hello again BG,

Yes, that is exactly correct. You will owe no federal or state taxes on this money and you are not even required to report receiving the gift.

Since the gift exceeds the annual amount of $13,000 which taxpayers are allowed to give without reporting, the donor of this gift will need to file Form 709 with the IRS to report the gift he is giving you. He will not actually owe any gift tax at this time, but the $30,000 gift will then reduce his remaining lifetime limit of $1 million. The majority of individuals other than the extremely wealthy never have to worry about paying gift taxes, as most people will never give gifts which exceed $1 million in their lifetimes.

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

Thank you BG

Customer: replied 7 years ago.
One more quick question. This relative would be receiving 60k as a 10% finders fee for helping a friend make a private sale. He would then be sharing the money with me, and so he would keep 30k and I would receive 30k as a gift. What kind of taxes should this relative expect to pay?
Expert:  Merlo replied 7 years ago.
Hello again BG,

Finders fees are treated as ordinary income, so the amount of tax he would pay on this will depend on what his total income is for the year, including this $60,000 finder's fee. It is your total annual income from all sources that determines the tax bracket you are in.

So if he has income from a regular job or interest or dividends or any other type of income, you would have to take his entire income in to account and his filing status of single or married to determine the tax bracket he would fall in. If you can tell me if he files as single or married and what his approximate total income will be for the year, including this finder's fee, I could give you an estimate of the taxes he will owe.

If this was helpful please press the Accept button.

Thank you BG

Customer: replied 7 years ago.
What about for me. If the 30k was considered a finders fee, and I file single taxes and make roughly 30k a year, what could I be looking at paying in taxes?
Expert:  Merlo replied 7 years ago.
Hello again,

If you were to report this $30,000 as income along with another $30,000 from your job, that would give you total income for the year of $60,000. Just using the standard deduction and one personal exemption, this would end up meaning that you would pay approximately 20% in federal tax on that $30,000 finder's fee, or about $6,000.

If you live in the state of OK, you would also owe state taxes at a rate of 5.5%, or about $1,650.

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

Thank you BG

Merlo and other Tax Specialists are ready to help you
Customer: replied 7 years ago.
This was extremely helpful, thank you ever so much!
Expert:  Merlo replied 7 years ago.
Thank you BG and let me know if you have more questions.