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Esther Said:I help support my parents by sending them money every so often. Can I deduct my gifts from my taxes?
We Answered:No, gifts are not deductible by the giver nor taxable to the recipient. The only tax break you could get for the money you send would be if you were able to claim them as dependents. But from your question, doesn't sound like that's likely. It would have to be over 1/2 of their total support that you're giving them, and if they had over $3400 in gross income then you couldn't claim them.
Margaret Said:Do I need to pay taxes on the gifts that I am sending to China?
We Answered:No. You already paid taxes when you earned the income to pay for those gifts. You may have to pay some kind of duty or fee, but it wouldn't be much. Just talk to the fed-ex or whoever you're shipping with people. They'll have all of the information on shipping to various countries.
Courtney Said:Can you give someone 5 years worth of gifts at once with out paying taxes?
We Answered:There is a five-year rule, but it applies only to gifts made to fund 529 plans.
A "529 plan" is a type of college savings plan.
If you make a contribution exceeding $13,000 to a 529 plan, you may elect to treat it as if you gave it equally over a five-year period. So, for example, if you gave $65k at once to a 529 plan, you can treat it as if you gave $13k a year over the next five years.
(Note: The gift must be made directly to the plan.)
For details, see page 5 of the Form 709 instructions under the heading "Line B. Qualified Tuition Programs (529 Plans or Programs)."
The five year option does not apply to most other types of gifts that you may be thinking of giving.
If this is the only gift you made, you do not make any more gifts to the beneficiary of the 529 plan in the 5-year period, and you do not exceed $65k, it will not affect your estate tax exclusion.
Thelma Said:If I get a financial gifts do I have to report it on my taxes?
We Answered:Nothing at all.
The giver would need to file a gift tax return if they give more than 12K to each person. They probably won't have a tax bill but it counts against their lifetime limit.
This is pretty common so if you have a spouse and two parents they can transfer 12K each from each of them to each of you so move 48K then do it again in January so they don't even need to file a return.
Oscar Said:Do the families on Extreme Makeover-Home Edition have to pay taxes on the improvements/ gifts they receive?
We Answered:I would say technically YES.
Here is an article from NEWSWEEK:
Television: Tax Trouble for ABC's 'Extreme' Winners?
May 17 issue -
Last fall Trent Woslum, a National Guardsman who was deployed in Iraq, got an e-mail from his wife. She'd been contacted by a new TV show called "Extreme Makeover: Home Edition," which wanted to do a big renovation of their southern California home—free of charge. By mid-December the family had new furniture, appliances and even a backyard baseball diamond. Estimated value: as much as $250,000.
The production company gave the Woslums a letter saying its accountant believed the family didn't have to pay taxes on their windfall, but when the family's own accountant read it, he grew wary. "I'm living in fear and trepidation," says accountant Brett Porter. If the IRS looks closely, he worries, the family could owe thousands in taxes. "There's no way I'd be able to pay," says Woslum, whose savings ran dry during his deployment.
It's common knowledge that lottery or TV game-show participants must pay taxes on their winnings. On "This Old House," homeowners routinely pay taxes on donated products. But the producers behind ABC's "Extreme," which picks cash-strapped families for a seven-day home renovation, think they've found a way around the taxes. According to documents obtained by NEWSWEEK, the show leases participants' homes, paying $50,000 for 10 days' rental. Instead of cash, the show gives the family flat-screen TVs and appliances. Since the IRS allows tax-free rentals of less than 15 days, the homeowners don't owe taxes on their new goodies. And by renting the home from the family, producers apparently believe the renovations are tax-free under a "leaseholder improvement" loophole.
But NEWSWEEK ran that logic by a half-dozen outside tax professionals. While some called it clever—even "elegant"—most scoffed at the show's approach, saying the IRS would be highly unlikely to agree with all aspects of it. "When you look at the big picture, these provisions were not meant for this," says Jim Seidel of RIA. The result: if audited, the "Extreme" families could be hit with huge tax bills. The IRS, ABC and the show's producers and accountant declined to comment. For Woslum, the problems go beyond taxes. He describes leaky bathrooms and cracked stucco. One of the snazziest additions—a carwash shower—has never worked; he claims producers used air compressors to make it appear functional for the show. Rivals aren't surprised. "You can't do a quality job in one week," says Norm Abram of "This Old House," which spends up to 12 months on projects. He worries that the "Extreme" winners are really "victims of the program." As for the taxes, if the Woslums are audited they may sue the producers. Sounds like the makings of a great reality show—for Court TV. —Daniel McGinn
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appliances and even a backyard baseball diamond. Estimated value: as much as $250,000.