Hi there, I wonder if you could help me. My wonderful mom is giving me 40k to help me get out of some insane high interest credit card debt. My question is what is the best way, tax wise, to go about handling this transaction. I will be paying off the cards immediately with this money. Would i be taxed on this money if she deposits it into my account? She lives in South Carolina and I live in GA. Or would the credit card companies let her make the payments? i would rather not hassle her with that if I don't have to. thanks!
State/Country relating to question: Georgia
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An individual can gift up to $13,000 per recipient for 2010 and not subject to the tax. In a marriage, a couple can pool their individual gift exemptions to make gifts worth up to $26,000 recipient. So, if your parents are married, they could gift you $26,000 without any tax consequence. What you may consider is having them gift $26,000 now and $14,000 during 2011, if they are married or $13,000 now and $13,000 during 2011, if you mom is single. Please see the attached publications and documents from the IRS:
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Ok. so my understanding is she can give me 13,000 (she's single) this year and 13,000 next year without my paying taxes. But if she gave me 13,000 this year, then the rest next year (27,000) I would be taxed on 14,000, is this correct? How much would I be taxed on that amount? thanks!
No, you would never pay taxes on these gifts. Your mom is responsible for paying the gift tax and filing a gift tax return if amounts to any one individual go over the $13,000. If the amount is $13,000 or under each year, there is no filing requirement and you and your mom pay no tax. The only requirement is that you mom keep track of all the gifting throughout her life because this amount will reduce her lifetime exclusion.
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Ok. I understand. That's great news! Thank you!