I want to give my kids money but have heard they will have to pay taxes on it. Is this true?
Estate Planning Attorney
Under the internal revenue code money received as a gift or bequest is not taxable income to the recipient. You, however, might be charged a gift tax depending on the amount of money you give each of them. You should consult with an experienced tax attorney for further advice.
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.
1. Gifts that are not more than the annual exclusion for the calendar year. The annual exclusion applies to gifts to each donee and is currently $12,000.00 per donee per donor. If a married couple wish to give a gift to their children, they can give $24,000.00 per donee.
2. Tuition or medical expenses you pay for someone (the educational and medical exclusions).
3. Gifts to your spouse.
4. Gifts to a political organization for its use.
In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made. You cannot deduct the value of gifts you make to other donees.
Gifts are not taxable income, so your children will not have an income tax liability. If the gift is greater than your annual gift tax exclusion ($12,000 per person), then you will have to report the gift on a Federal gift tax return (IRS Form 709). If the gift is greater than your lifetime gift exclusion ($1,000,000), you - the donor - will have a gift tax liability. So, the answer to your question is "no, your children will not have to pay taxes on a gift."