How are Gifts Taxed? 

Income is taxed (unless specifically excluded). What you choose to do with your income after paying tax on it is up to you. For example, if you use it to buy things in a state that doesn’t charge a sales tax, would you say those purchases are taxed???

Thanks!

Thank you!

Thank you!

I can't formally advise what you should or shouldn't do. Considering how close together the two transfers of $125k were, I'm frankly not 100% sure what the official IRS stance would be on this. But on the surface, the series of events you described appears to be one of two things: 1) you gifted your son $125k and he separately gifted you $125k, or 2) you gave an interest-free loan to your son and he repaid it. If option 1 is the proper way to view it, you and your son technically each should file a gift tax return to report that you gave $125k to one another. No one will owe any tax on anything, but the "gifts" would nonetheless have to be reported. If option 2 is the proper way to view it, then I think you would have had to charge your son interest (there is a concept of "imputed" interest whereby the IRS doesn't allow interest-free loans between people like this and would assume you should have been receiving interest - and claiming it as income - at a fair market level). But then if you didn't actually get any interest from your son, I think the amount of interest you SHOULD have received may be treated as a gift to him. And that gift size would be below the annual gift exemption limit such that nothing would need to be reported. But ultimately, my official answer to you is "I don't know." Because I really don't!

Yes, I believe that is correct...you don't automatically get the DSUE; a return needs to be filed within a certain amount of time to get it

Thank Kevin. Good suggestion, I'll put it on the list!

Yes, sorry; this is in the context of gifting already-tax assets. You can't gift directly from an IRA. You can make donations to qualified charitable organizations directly from an IRA (if you're over 70 1/2, via something called a Qualified Charitable Distribution). But you can't gift directly to non-charities. You basically have to first take a normal distribution, and then you're free to do with that money whatever you please, including giving it away to friends, family, etc. The distribution is still taxable just the same as any other reason for taking a normal distribution.

If the gift from the spouses to the same recipient is more than $15k (but under $30k), each spouse should separately give a gift. For example, if spouses are giving $20k to a child from a joint bank account, that $20k should be split up such that it's two payments of no more than $15k each. Spouse A could write a check for $15k from the joint account and Spouse B could write a check for $5k from the joint account. Basically, even though it's a joint account, each spouse needs to independently give their portion of the gift

Did you already gift away more than your lifetime limit of $12,060,000? Only after you gift away more than that do you have to actually pay tax on gifts you give. Otherwise, if you gifted away more than $15k to a single person last year, you'll have to file a Form 709 to report the gift. But you won't have to pay tax on it (Form 709 is what's used to track how much of your lifetime gift limit you've thus far used up)

It’s when you gift it. The IRS has thankfully clarified that those who gift more than what the future lower limits will be will fall under the limits that were in place at the time they made the gifts.

Yes, you’re functionally gifting that person half of the ownership and value of the car. If the car’s current fair market value is $17,000, the value of the gift is $8,500

​@@RetirementPlanningEducation If I add my best friend in my primary home title as joint owner with rights of survivorship then my gift amount is (current fair market value of my home) / 2 as we both are like joint owners. Is my analysis correct? Just to be same page out of my diligence. And any years we exceed annual yearly gift tax amount, we just only need to fill IRS Form 709 and do not worry about paying gift tax as long as we did not exceed life time estate exclusion amount which I guess is $12.92 million in 2023.

@@boyboy-xe6rx correct

@@RetirementPlanningEducation Thank you soooo much very sincerely from bottom of my heart. Very grateful.

@@RetirementPlanningEducation Apart from submitting IRS form 709, is there any other form to officially let IRS know we would like to deduct anything over annual gift exempt amount from life time exclusion amount? Or IRS 709 handles everything?