Clients often ask me if gifts they’ve received need to be reported as income on their taxes. Like most things in the tax world, the answer to this question depends on several different factors.
In today’s post, I’ll explain when gifts need to be reported as income and if you’ll ever need to pay gift tax.
Do I have to report gifts as income?
Generally, if you’re just a typical (and certainly fabulous!) taxpayer receiving a gift from another typical taxpayer, like a friend or family member, then you don’t need to report most gifts you receive on your annual income tax return. This is true for monetary gifts and tangible gifts.
However, if you’re the giver in this situation, you may need to report the amount or value of the gift if the amount exceeds the annual exclusion amount set by the federal government. If you exceed the lifetime exclusion amount, then you’ll also need to pay gift tax.
Additionally, if you’re a blogger, social media influencer, or content creator, gifts you receive from clients or companies are considered income, so income taxes can apply to those gifts. We’ll talk more about that later in this post.
Do I have to report gifts I give on my annual income tax return?
Even though the Internal Revenue Service (IRS) says, “the general rule is that any gift is a taxable gift,” there are many exceptions to whether you’ll need to report the gifts you give:
- You only report gifts if the amount is above the annual exclusion amount for that calendar year (more on that in a minute).
- You don’t report gifts or pay gift tax on money you give towards tuition or medical expenses as long as you pay the educational institution or medical facility directly.
- You don’t report gifts or pay gift tax on gifts to your spouse.
- You don’t report gifts or pay gift tax on money you give to political organizations.
Additionally, in some circumstances, you can make arrangements for the recipient to pay the gift tax, but you would need to work with a tax professional to make sure you document this process correctly.
One other thing to remember is that charitable donations are usually not subject to gift tax, and they can even be tax deductible if you itemize your taxes.
Do I have to pay gift tax? What is the lifetime exclusion amount for gift tax?
Paying gift tax is extremely rare because this tax only applies to gifts you give after you’ve met the lifetime exclusion amount. In 2023, the lifetime exclusion amount is $12.92 million, and that amount is per recipient. In 2026, the lifetime exclusion amount is set to drop back down to around $5 million per recipient, but most people still will not exceed this.
What is the annual exclusion amount for gift tax?
The annual exclusion amount is the limit you’d have to exceed when giving a gift in order to be required to report the gift on your annual income tax return. The cool thing is that this amount applies to each individual gift. So if the annual exclusion amount is $20,000, you could give $19,999 to three different people and still not have to report those gifts on your taxes.
The annual exclusion amount can change every year, but here are some recent numbers to give you an idea:
|Year||Annual Exclusion Amount Per Gift|
How do I report gifts on my tax return?
If you’ve surpassed the annual exclusion limit and need to report gifts on your tax return, you’ll use IRS Form 709 to do so. Remember this doesn’t mean you’re paying gift tax; it just means you’re reporting the monetary gift or the value of a tangible gift.
If I’m a blogger, social media influencer, or content creator, do I have to report gifts as income?
When you’re a blogger, social media influencer, content creator, or a similar online professional and you receive gifts from clients or businesses, these gifts are almost always considered income. This means you’ll need to report the gifts on your tax return and pay any applicable taxes on that income.
For example, if a company that makes and sells hair products sends you $500 worth of products in exchange for you posting a review on your blog, then you’ll need to report that amount as income on your tax return. And, this may blow your mind, but if you’re at a conference and receive swag, the value of that swag usually counts as income as well.
Additionally, even if a company sends you a gift and you’re not necessarily providing any specific content or review in exchange for that gift, you may still need to report its value as income. This is because the company who sent the gift will report it as a marketing expense on their tax return, so the IRS is alerted to be on the lookout for the receiver to report that amount.
For this reason, it’s smart to ask companies to contact you prior to sending you any gifts. Of course, you can also turn down gifts to avoid having to report income for gifts you didn’t want in the first place. And if you’re not sure if you must report a gift or not, make sure to speak to an accountant who works with entrepreneurs like you.
What do I need to remember about reporting gifts as income on my taxes?
Here are some key points to remember:
- The gift-giver will need to report a gift if the amount of the gift exceeds the annual exclusion amount.
- The gift-giver will need to pay gift tax if the gifts they’ve given to a single recipient exceed the lifetime exclusion amount.
- Bloggers, social media influencers, and content creators will need to report gifts as income on their annual tax return.
- No matter who you are, it’s always important to keep accurate records of any gifts you’ve given or received and to contact a tax professional when you have questions about reporting gifts on your taxes.