Must Know | Do I Have to Pay Tax If Someone Gives Me A Gift?
Hypothetically speaking, your wealthy best friend gave you a nice check; maybe it’s enough to get a designer dress or buy your favorite watch.
Either way, do you need to worry about paying a tax?
Well, tax is perhaps the last thing somebody would think of when receiving gifts from their loved ones. The truth is, gift taxes are a thing.
Who exactly has to pay the gift tax? The receiver or the donor?
And in what circumstances do taxes apply? I mean, does anybody owe a tax on gifts as small as perfumes or cosmetics?
If you love strengthening bonds with your family and friends and enjoy giving gifts, such questions will likely pop into your head. Similarly, if you receive a gift, you might want to know if the gift would increase your monthly expenses?
Below, we’ll answer all the questions that got you bugging about gift taxes.
Also, we’ve shared a list of super cool and unusual gifts to give to your beloved ones.
What Is A Gift Tax?
A gift tax is a federal tax imposed on a person giving something valuable to another person. The federal gift tax was enacted to prevent taxpayers from evading income taxes by giving expensive gifts.
However, not everyone giving gifts of any sort is liable to pay the tax. That is, only a few people owe taxes.
For instance, if your gift exceeds $15,000 annually, the IRS is involved, and you’re required to pay a tax.
Do I Have to Pay Tax On Receiving a Gift?
Who has to pay the tax is yet another concern. According to the Internal Revenue Service (IRS), the giver is typically responsible for paying the tax. So, if you’re receiving a gift, you do not need to worry about paying taxes.
Nonetheless, if you want to pay the tax (under certain agreements) as a receipt, you can. However, you’d need to visit a tax professional to get things sorted out in this regard.
How to Avoid Gift Tax?
Fortunately, you can avoid gift taxes under particular circumstances. Why? Because there are a lot of exceptions when it comes to the gift tax.
Here are a few things that are not subject to gift tax:
- You can give an unlimited amount of tax-free gifts to your spouse if they are a US citizen. If, however, they are not US citizens, then tax-free gifts are restricted to a certain value annually ($159,000 in 2021)
- Medical or educational expenses of someone
- Gifts that are equal to or below $15,000 yearly
- Gifts to charitable firms
- Gifts to a political organization (for their use)
Gift Tax Calculation And Exclusion
If you give up to $15,000 to someone in a year, you do not have to pay any taxes (in 2020 and 2021)
However, if you give cash or items worth more than $15,000 (moveable or immovable property, stocks, etc.), you’d need to file a tax return.
That doesn’t exactly mean that you need to pay a gift tax. Instead, it means that you are required to file IRS Form 709 to purchase the gift.
Also, note that annual exclusion is per person. For instance, you and your spouse can exchange a combined $30,000 gift yearly without filing a gift tax return.
What’s more, annual gift tax exclusion is also per receiver. In other words, it is not the sum of all the gifts that you bought or gave.
For instance, if you gave a $15,000 gift to your mom, another $15,000 gift to your best friend, and another gift of the same amount to your cousin all in the same year, you are not required to file a tax return.
In addition to the $15,000 yearly exclusion, you can obtain a lifetime exclusion of $11.7 million in 2021. Further, married couples can exclude twice as much in lifetime gifts. So, it’s a plus if you plan to give more than $15,000 to your spouse.
5 Unusual Gifts For Your Loved Ones
Exchanging gifts is a great way to make someone feel loved. What’s more, it’s a gesture that speaks volumes about your relationship with another person and how much you value them. On top of that, giving gifts is an opportunity to express your gratitude.
Also, now that you know that the receiver doesn’t have to pay any tax, you can simply get your loved one anything you like.
So, if you’re looking to give a special gift to your family, friend, cousin, or your loved one, we’ve curated a list of unique and unusual gifts for you.
1. Floating Moon Lamp
Our bedroom is a haven for us, where most of us seek tranquility after a hectic day. A warm cup of coffee and moonlight can add to the serene atmosphere. However, not everyone has a window in their room to catch sight of the moon.
So, how about having something similar in your room? That’s right, the Floating Moon Lamp creates a perfect ambiance after a tiring day, and your loved one won’t be disappointed to receive one from you.
This enchanting moon lamp rotates at 360 degrees and floats freely in the air. What’s more, you can adjust the light modes, from bright light to warm glow.
It’s a perfect gift to purchase for your loyal partner as it tops the category of unique and unusual gifts.
2. Caramel and Chocolate Gift Basket
You do not need an occasion to have fun and celebrate with your family, and rightfully so. Family is where our life begins, and love never ends.
The time spent with your family is worth far more than money, so a celebration with them doesn't have to cost a lot.
To celebrate love with your family, you can consider buying a Caramel and Chocolate Gift Basket.
Everybody loves chocolates and random treats, and therefore this basket is a perfect gift to share with your family.
The deliciousness of sweets will please your family's taste buds no matter what the occasion or the moment. Here’s a quick look into the package:
- Caramel Gourmet Popcorn
- Chocolate Drizzle Caramel Popcorn
- Peanut Brittle
- White Chocolate Caramel Drizzled Pretzels
- Chocolate Almond Bark
- Ghirardelli Dark Chocolate Squares
- Ghirardelli Caramel Filled Milk Chocolate Squares
The awesomeness packed in this scrumptious box will certainly add to the love and warmth of your family.
3. Lavender Scented Candle
There are friends, and then there is family, and then there are friends that become family. Nothing can beat the support, love, and empathy of a true friend.
If you have a best friend who has always been by your side through your highs and lows, now is the right time to make them feel special with these Lavender Scented Candles.
This friendship candle makes up for a humorous gift for your pal. Though it’s a scented candle, it comes with a quote, “Our friendship is like this candle; if you forget me, I’ll burn your house down.”
This candle burns evenly and with a bright flame because it is made from 100% natural soy wax.
What’s more, the lavender scent is excellent for alleviating stress and anxiety and promoting sleep. You can gift this candle to your best friend as a Christmas present, a birthday gift, or a present to celebrate your friendship with them.
It will be a perfect addition to their kitchen, bathroom, bedroom, or living room (wherever they desire to place it).
4. Minimalist Multi-Color Lamp
A Minimalist Multi-Color Lamp is yet another unique item in the category of unusual gifts. While a floating moon lamp creates a serene atmosphere, a multi-color lamp complements the room’s decor.
You can gift this to any person (a neighbor, cousin, friend, or spouse), and it’ll create just the right ambiance. That is, whether they want to have dinner with a spouse or a party with their friends, they can adjust the lamp modes accordingly.
The lamp allows you to switch to yellow, blue, purple, green, and multi-colors. What’s more, you can choose your favorite 2 or 3 colors for a split color combination.
Also, it can be mounted just anywhere; bathroom, bedroom, living room, or kitchen. This vintage lamp made of quality components will make up for a valuable gift for your loved one
5. Dork Diaries Friendship Box
A loyal friend is a priceless gift you can receive in your life. To celebrate your friendship with your favorite buddy, consider giving them a Dork Diaries Friendship Box.
This ultimate friendship kit is packed with a personal dork diary, stickers, a cute pen, friendship bracelet, and friendship cards.
If your friend is into collecting cute stuff, they will adore this box for sure. They can use the pen to write on the dork diary and paste stickers to create their memories with you.
Good friends are hard to find, so make sure you value your amigo and make your friendship special by exchanging gifts.
If you receive gifts from your friends and family now and then, perhaps you’d think about whether or not you need to pay a tax. Typically, the person receiving a gift is not required to pay taxes.
However, if the gift exceeds $15,000 annually, the donor is required to file a tax return for the gift that they purchase.
If you’re looking for some tax-free, cool, and unusual gifts for your loved ones, you can consider buying from our list above.
Floately is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.
You may also like: How Long Does It Take to Charge a Floating Moon Lamp?