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How to File a Gift Tax Deduction

 

The gift tax deduction is a deduction for property that is transferred from one person to another. This is considered a gift, which may qualify for a deduction, reducing the amount of taxable income you have. There are a few stipulations for claiming the gift tax deduction.

Qualifying Gifts

The term gift includes any sort of property or even money that you give to someone else. For this to qualify as a gift, you must not receive any compensation for this gift, or compensation must be less than the value of the gift. A gift can also include a loan that has low interest or no interest. This deduction is limited to gifts up to $13,000 to each person. You are allowed a bigger exclusion, up to $26,000, if you and your give away property that you both own. There are still some limitations to this deduction. It does not include medical bills or tuition paid, gifts to a spouse, or those given to a political organization.

Filing

When you get ready to file your taxes, there are some records you will have to have. You will need an appraisal on the transferred property, any documents you have concerning the gift, and documentation of any unusual items on the return. You will be given a deduction equal to fair market value of the item. The IRS recommends you talk to an attorney if the transfer is worth a large amount of money. If you have any questions, you can contact your tax preparer or the IRS for more information about your small business taxes.

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