The federal gift tax exists for one reason: to prevent citizens from avoiding the federal estate tax by giving away their money before they die. The gift tax is perhaps the most misunderstood of all taxes. When it comes into play, this tax is owed by the giver of the gift, not the recipient.
Why does the donor have to pay gift tax?
The federal gift tax was created to prevent taxpayers from giving money and items of value to others to avoid paying income taxes. The gift tax is applied to the donor to prevent undue hardship and to oblige givers to honor their tax liability, as the Internal Revenue Service (IRS) dubs the giver.
Do I have to pay taxes on gifted money?
Generally, the answer to “do I have to pay taxes on a gift?” is this: the person receiving a gift typically does not have to pay gift tax. The giver, however, will generally file a gift tax return when the gift exceeds the annual gift tax exclusion amount, which is $15,000 per recipient for 2019.
How do I gift my house to my child tax free?
Gift. You can give ownership of your property to a family member as a gift. This simply requires filling out the necessary paperwork with your state revenue office and title office, including a Transfer of Land.