Do I Have to Pay Taxes on Gifts?

If you want to give someone you care about a sizeable monetary gift or an item with significant value, prepare to pay NYC gift tax! Master NYC gift tax regulations: explore this website for expert guidance on gift tax planning in New York City.

Gift tax is a federal tax you must pay whether you live in NYC or another state. It applies when you transfer money or property to others who get nothing in return. So how does it work, and when must you pay it?

Gift Tax Basics

Don't worry: Small birthday gifts and expensive buys don't come with gift taxes. There's a threshold you must meet. In 2023, the gift tax limit is $17,000. That means gift taxes apply on any gift valued at $17,000 and higher. Writing a check for $10,000 is fine. But if you gift a loved one a $20,000 car, you must report it to the IRS.

One important thing to remember is that exceeding the gift limit and reporting it on your taxes doesn't necessarily mean you have to pay taxes.

That's because there is a lifetime gift limit. Every individual has a lifetime exclusion. In 2023, that figure rose to $12.92 million. For couples, it's double that amount.

The lifetime exclusion is how much you can give away as gifts throughout your life. So, say that you give a car worth $20,000 in 2023. You'll have to report it, but you won't have to pay anything because that extra $3,000 above the annual exclusion goes against your lifetime limit of $12.92 million.

You can give many gifts throughout your life, but it's important to consider the implications on your estate after you die. What you don't use as part of your lifetime exclusion will go against your estate.

Who Pays NYC Gift Tax?

The gift tax applies to the gift giver, not the recipient. You're responsible for reporting gifts exceeding the annual exclusion limit; anything above that reduces the lifetime limit. Recipients don't have to report gifts to the IRS. The only exception is when that gift produces taxable income later. For example, they'd have to report taxable income if you gift them a house they decide to rent.

Read a similar article about tax service New York here at this page.