Tax Tips: Gift taxes

Someone wants to give you a gift of money (lucky you!) but you don't know what to do in terms of your tax return. Rest easy! As the receiver of the gift, you don't have to do anything. I admit it... the tax rules surrounding gifts are a bit counterintuitive. The giver of the gift is the one who might have to report the gift and pay any taxes associated with it. How's that for encouraging them to give you gifts?

Seriously, though... The rules go like this. In 2007, a person could give a gift of up to $12,000 per person, without having to report it to the IRS. Married couples can gift up to $24,000 to someone without having any gift tax consequences, because this essentially equals each of them giving the person $12,000.

The gifts included in this rule include money, property, or the use of property. Items that are usually excluded from the gifting rules include tuition paid directly to the school, medical bills paid directly to the provider, gifts to a spouse, gifts to a political organization, and gifts to charities. More information on gift taxes can be found in Publication 590, Introduction to Estate and Gift Taxes.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.