Can You Deduct Money Given as a Gift to an Individual?

Excessive financial gifts are viewed as income by the IRS.

Excessive financial gifts are viewed as income by the IRS.

You can't deduct money that you give someone as a gift. The only donation deductions you can claim are charitable contributions to an IRS-recognized 501(c)(3) nonprofit organization. In fact, depending on the amount, you may owe taxes on money you give another individual as a gift. This obligation is known as the "gift tax."

Gift Tax Basics

Small gifts you give to friends or family usually don't create a tax implication. However, giving a financial gift over the annual limit to another individual for which you receive nothing of value in return causes a tax burden. As of 2013, the annual limit for an individual gift was $14,000. Thus, if you gave someone $20,000, you would be subject to a gift tax on the $6,000 difference. Alternatively, you can work with your tax professional and arrange for the recipient to pay the tax.

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Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

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