Home > Legal > Questions & Answers > Tax > Received a gift worth $1,000 from a friend, does this need to be reported to the IRS, federal gift tax return
Received a gift worth $1,000 from a friend, does this need to be reported to the IRS, federal gift tax return
Gifts can be taxable. However, gifts of $12,000 or less per year from one individual to another are exempt from gift taxation. Over and above the $12,000 per year limit, each individual is entitled to a lifetime estate and gift tax exclusion of $2,000,000 for 2008 which increases to $3,500,000 in 2009 and disappears entirely in 2010. I realize this is confusing but the clear answer to your question is that no tax will be due from the gift you describe.
If it was a true gift, for federal taxes, the money is not taxable income to you and not a deduction to the giver. If you did some work to get the "gift", it is not a gift. If all you get in the year from that friend is $1000, then the amount is under the annual exempt amount (currently for the federal government $12000) for filing a federal gift tax return.
Your state and local governments may have different rules. But it is unlikely that the tax exempt amount for gifts would be around $1000.
Section 61 of the Internal Revenue Code says that all income is taxable unless otherwise provided. If the gift is just that -- not compensation for house-sitting or doing someone a special favor-- it is exempt under the Code. If it is genuine it is tax free.
