Wednesday's tax tip Vol. 16 - Gift Tax

Maybe one of the most misunderstood tax laws is the gift tax. Here is a FAQ on the IRS site about gift taxes.

In general, the giver of the gift must pay gift tax if the amount of the gift exceeds $12,000 per person, per year (2006 & 2007). The receiver of the gift does not claim the gift as income or need to pay gift tax from receipt of the gift.

For example, let's assume you decide to give your child $20,000. That gift would be subject to gift tax. However, a married couple can each give the $12,000 to that child meaning that no gift tax is now due.

In addition, you could give a family of four up to $48,000 and, if married, up to $96,000 to that family each year.

Another myth buster.... Gifts to individuals are not deductible (for federal income tax purposes) for the giver, regardless of the circumstances. The only deductible gifts are to qualified 501(c)3 charities.

Like most tax advise, this is a simple rule of thumb, if you want an answer to your particular situation, talk to your adviser or email me at gtvcpa@yahoo.com.