Significant Cash Gift

SeñorAmor

My mom recently came into a significant chunk of money and, as moms are wont to do, she'd like to give both myself and my sister a significant gift -- to the tune of $10,000 (each).

I don't want to run afoul of any gift or tax laws, so before I cash the check she wrote me, I want to make sure this all goes down smoothly.

I am no expert on this subject, but a cursory Google search seemed to indicate that gifts under $15,000 do not need to be reported and do not incur any sort of tax.

Can someone with more expertise on this kindly chime in and let me know if there's something I'm missing or offer any advice on if there is a best way to proceed?

Thanks in advance.

Thundyrkatz

Great news for your family!

The maximum gift per year is $15k per giftee. There is a lifetime cap of $11.2 million per giftee as well. The gift tax (which won't be applicable here) is paid by the gifter.

Here is what the IRS has to say on the topic.

This article is a little easier to digest.

Enc

If you use such a gift for something like, say, a house down payment within a year of receipt expect the mortgage company to require to see the source of funds from your mother and/or the inheritor's estate.

zepherin

There are ways around the gift tax as well if your mom is so inclined.

One way is for her to loan the money to you and your siblings at 0 percent interest and write off 15k from the loan every year.

But unless she came into 10s of millions of dollars, it doesn't really matter, and the IRS isn't going to beat on your door.

Burtletoy

zepherin wrote: »

There are ways around the gift tax as well if your mom is so inclined.

One way is for her to loan the money to you and your siblings at 0 percent interest and write off 15k from the loan every year.

But unless she came into 10s of millions of dollars, it doesn't really matter, and the IRS isn't going to beat on your door.

The IRS is actually less likely to knock down your door if it is 10s of millions of dollars than if it was $15001.

Gdiguy

Thundyrkatz wrote: »

Great news for your family!

The maximum gift per year is $15k per giftee. There is a lifetime cap of $11.2 million per giftee as well. The gift tax (which won't be applicable here) is paid by the gifter.

Here is what the IRS has to say on the topic.

This article is a little easier to digest.

This is correct; also it's $15k per giftee per gifter, so for example your mom and your dad could each give you $15k (and could each give your spouse $15k if you had one)

zepherin

Burtletoy wrote: »

zepherin wrote: »

There are ways around the gift tax as well if your mom is so inclined.

One way is for her to loan the money to you and your siblings at 0 percent interest and write off 15k from the loan every year.

But unless she came into 10s of millions of dollars, it doesn't really matter, and the IRS isn't going to beat on your door.

The IRS is actually less likely to knock down your door if it is 10s of millions of dollars than if it was $15001.

Not really, $15001, that 1 dollar goes against the lifetime gift maximum. It's still not taxable, just requires some documentation.

Orogogus

Burtletoy wrote: »

zepherin wrote: »

There are ways around the gift tax as well if your mom is so inclined.

One way is for her to loan the money to you and your siblings at 0 percent interest and write off 15k from the loan every year.

But unless she came into 10s of millions of dollars, it doesn't really matter, and the IRS isn't going to beat on your door.

The IRS is actually less likely to knock down your door if it is 10s of millions of dollars than if it was $15001.

I'm reasonably sure that's not true. The audit rate on the top tier has been slashed, but it's always been much higher than the middle class income ranges. This page appears to corroborate that:

https://www.forbes.com/sites/ashleaebeling/2019/05/20/irs-audit-rate-on-the-rich-collapses/

Even with their audit rate slashed, the $10 million tier is still more than ten times more likely to be audited.

The exception is poor people claiming the earned income tax credit, I think usually making $15k or less, who apparently get audited a lot.

Mugsley

Just make sure your mother is consulting with a tax accountant to ensure she's handling the funds properly and tax time next year won't be an utter mess.

zepherin

Mugsley wrote: »

Just make sure your mother is consulting with a tax accountant to ensure she's handling the funds properly and tax time next year won't be an utter mess.

If it's winnings (gambling) then it is crucial before spending to start working with an accountant. If it's inheritance, it's probably fine to wait until tax time unless it's a substantial (millions) amount.