You may have to file a gift tax return for presents on the expensive side…

We all know that we can’t write off a designer bag or a watch that we’ve bought for ourselves. On the other hand, let’s say you want to surprise someone with a brand new first car for the holidays. If you didn’t know, the IRS establishes an limited amount until you have to file a tax return, just for the gift you’re planning on giving!

Here’s what you need to look out for when you’re going all out for the holidays.

First off, what is the federal gift tax?

The federal gift tax applies to the transfer of money or property to an individual while receiving less than the full value in return or nothing at all. There is a gift tax exclusion (subject to inflation per tax year) which sets a limit of how much in value they can gift per person before having file Form 709 to the IRS.

Here are the gift tax exclusion amounts from tax years 2002 to 2018. Continue reading “The Holidays are Coming and so is the Gift Tax!”