Gift Taxes

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If you gave any one person gifts in 2009 that valued at more than $13,000, you must report the total gifts to the Internal Revenue Service and may have to pay tax on the gifts.

The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.

Gifts include money and property, including the use of property without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.

There are some exceptions to the tax rules on gifts. The following gifts do not count against the annual limit:

Tuition or Medical Expenses that you pay directly to an educational or medical institution for someone's benefit
Gifts to your Spouse
Gifts to a Political Organization for its use
Gifts to Charities

If you are married, both you and your spouse can give separate gifts of up to the annual limit to the same person without making a taxable gift.

For more information, get the IRS Publication 950, Introduction to Estate and Gift Taxes, IRS Form 709 or 709-A, United States Gift Tax Return, and Instructions for Form 709.

What Income is Nontaxable?

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Generally, you are taxed on income that is available to you regardless of whether it is actually in your possession. But there are some situations when certain types of income are partially taxed or not taxed at all. A complete list is available in IRS Publication 525, Taxable and Nontaxable Income.

Some common examples of items that are not included in your income are:

Adoption Expense Reimbursements for qualifying expenses
Funding of your Health Savings Account with a one-time direct transfer from your individual retirement plan, health reimbursement account or health flexible spending account.
Child support payments
Gifts, bequests and inheritances
Workers' compensation benefits
Meals and Lodging for the convenience of your employer
Compensatory Damages awarded for physical injury or physical sickness
Welfare Benefits
Cash Rebates from a dealer or manufacturer

Examples of items that may or may not be included in your income are:

Life Insurance.
If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price.
Scholarship or Fellowship Grant.
If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.

These examples are not all-inclusive.

Tax Talk

Gift Taxes

What Income is Nontaxable?