Have a Tax Question? Ask a Tax Expert
My Dad wants to give me $20,000 to give to my 27 year old daughter to help purchase a house. Do I have to pay taxes on the $20,000?
I am 64, married, filing jointly with income over $100,000.
He doesn't want the other grand kids to feel slighted.
No, probably not. Taxes are paid on income. Income does not mean money, it means accumulation of wealth. Money you receive which does not increase your net wealth is not income. For example, if you take out a loan for $5,000, you incur a simultaneous obligation to repay that loan for $5,000, so your net wealth does not increase (your assets increased, but so did your liabilities), and therefore the $5,000 is not income. On the other hand, if you work for an hour and earn $50, that $50 is income because your assets have increase and your liabilities have not (working for an hour did not make you $50 poorer). To take it a step further, if you had the aforementioned loan, and were paying back at a rate of $1,000 per year, and in year 4 (after you've repaid $4,000) the lender forgives the balance, then you would have $1,000 in income that year, because even though you received the money long ago, you did not receive a net increase in wealth until the $1,000 liability was forgiven.
These are just examples to help illustrate the point that the money your father is giving you for your daughter is a gift from your dad to your daughter, so long as you don't have the choice to do something else with the money. In this situation your wealth never increases.
On the other hand, your father is going to have to file a gift tax return for making a gift that large. I would not recommend this strategy. He'd be a lot better off making two separate smaller gifts, or splitting it up into two tax years. He should talk to an accountant about this to avoid gift tax consequences. There is a lifetime exemption, but again this is different set of questions, and he should consult an accountant.
I hope this answers your question. As always you should talk to your accountant about it to make sure there is not some special detail relevant in your situation of which I am not aware. If this answer helped, please leave positive feedback. Thank you and have a great day.
Hello and thank you for using Just Answer,
As a Tax Expert, I can advise you that you nor your father would have to pay tax on the gift. Your father can give $10,000 to you an d then $10,000 to your spouse. You and your spouse would each give your daughter the $10,000 a piece (the annual limit is $13000 so you would all be fine). No reporting and no tax to anyone.