Why do gifts get taxed?

[jiji2006]

Why is it when you give someone a gift more than the $13k, you get taxed? You gave someone something so why does the tax lies with yourself?

 

[gregorymorrill]

Because it is under the law that all process are taxable

 

[bklynboy]

Why is it when you give someone a gift more than the $13k, you get taxed? You gave someone something so why does the tax lies with yourself?

A big reason is so people dont avoid paying estate taxes. For instance, if I have accumulated significant wealth, I could gift my entire estate and not have to worry baout the estate then being taxed. This rule then taxes the individual that owed the wealth (the donor) so that they pay the tax under an estate or gift rule.

 

[ayanachan]

It is under federal law that you can able to give up to $13k in cash or any assets per person without any gift tax and if you give more than $13k, then excess will be taxed under the IRS gift tax guidelines.

 

[caspergreen68]

Some portion of the excess amount is to be paid as tax, and this is under government norms.

 

[accounting nerd]

You get a gift exemption to your family members in the US.

 

[ColinCPA]

Firstly, it is not true that cash gifts to a single person over the annual exemption amount (currently $14K) are immediately taxed. A gift over this amount is considered a "taxable gift", which simply means that a Form 709 must be filed to report the gift. This "taxable gift" amount is applied against the individual's lifetime exemption amount, which currently starts at $5.25 million. So, gift tax will never be owed if you never cross this threshold.

The tax is assessed to basically punish the rich and prevent avoiding the estate tax, which mimics the gift tax.

 

[The Finance Writer]

Giving a gift of more than the annual exclusion from tax -- $14,000 for 2013 -- is a situation calling for assistance from either a tax expert who has passed the Enrolled Agent exam or a CPA specializing in tax. Many variables affect each case. For instance, gifts to family members are subject to gift tax, expect a gift to a spouse. Moreover, gift splitting arrangements among spouses can result in gifting that meets the annual exclusion. However, filing a Form 709 is still required. Remember that using any part of your $5.25 million lifetime exclusion to exempt gifts from tax reduces the amount available for excluding your estate from the estate tax.

 

[JustainMax]

I agree that it is under the law but as i consider it is a bit wrong but as it is under the law so we have to practice it.
I think we must have some exemption options too so that we can easily give gifts to our loved ones..!

 

[AmyHussey]

It is the tax law so people don't abuse the system. sad but true.