10 Must-Know Tax Tips for Gift Givers

12/1/2013 | Written by: Karen Reed, EA

With the 2013 holiday season upon us, here are some tax tips for gift givers. Work with your professional tax or financial advisor to determine the approaches that make the most sense for your goals and situation.

  1. The tax rules are completely different for personal, business and charitable gifts.
  2. You do not have to pay taxes on gifts you receive from family or friends, even if the gift is very large.
  3. There’s no tax deduction for giving a gift to a family member or friend, but giving more than a certain amount during the year may require you to file a gift tax return.
  4. You can give as much as you want to your spouse without tax consequences, except in very specific circumstances relating to gifted property.
  5. There is no gift tax requirement when you pay directly to a medical or educational institution for a friend or family member’s tuition or medical expenses.
  6. There is a $25 per family limit to the amount you can deduct as business gifts.
  7. The rules change from “gift” to entertainment when you treat an activity as entertainment as opposed to a gift, such as a trip to a theater, music or sports event. Fifty percent of the expense is deductible as an entertainment expense, as long as a true business purpose for the outing can be shown.
  8. There is no allowable tax deduction for political contributions.
  9. Gifts to IRS recognized charitable organizations are fully deductible, up to certain limits, on individual returns.
  10. For 2013 you can distribute up to $100,000 ($200,000 for joint filers) tax-free directly from your IRA to a qualified charity. The gift satisfies the minimum distribution requirement, but must be done trustee-to-trustee.