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Best Approach to Accepting Large Cash Gift? What should I do with it?
Posted on 2/8/16 at 1:30 pm
Posted on 2/8/16 at 1:30 pm
A relative wants to give me a substantial amount of money (subtle brag, I know...), and I'm trying to figure out the best approach to accepting it so that I don't get taxed out the arse, which I'm already expecting to happen. I won't give an amount, but I will say it's not enough to pay off my house.
My second question impacts the first, because I assume how I plan to use the money can also affect how it is taxed. I have kids, so is there a way to accept the money and put a portion of it toward a college savings plan without taking a big hit on taxes when I accept it? What if I just have my relative deposit an amount directly to the college savings plan?
Is there a better investment I could make? Is it smart to just put it toward the principle on my house? The amount covers about 1/3 of my mortgage. Should I put it in a mutual fund or retirement account?
I know everyone has their own preferences on this stuff, and everyone's situation is different, but I'm just trying to get an idea of what my options are.
Thanks in advance for any input!
My second question impacts the first, because I assume how I plan to use the money can also affect how it is taxed. I have kids, so is there a way to accept the money and put a portion of it toward a college savings plan without taking a big hit on taxes when I accept it? What if I just have my relative deposit an amount directly to the college savings plan?
Is there a better investment I could make? Is it smart to just put it toward the principle on my house? The amount covers about 1/3 of my mortgage. Should I put it in a mutual fund or retirement account?
I know everyone has their own preferences on this stuff, and everyone's situation is different, but I'm just trying to get an idea of what my options are.
Thanks in advance for any input!
This post was edited on 2/8/16 at 1:42 pm
Posted on 2/8/16 at 1:34 pm to Green Grass Miracle
Have the relative and his/her spouse gift you 14k each every year (28k) until you reach the amount he/she wanted to give you. If you're married, have them give 14k each to your wife.
14k was this past year. Not sure how much it increased for inflation.
14k was this past year. Not sure how much it increased for inflation.
This post was edited on 2/8/16 at 1:37 pm
Posted on 2/8/16 at 1:35 pm to Green Grass Miracle
You are allowed to receive around $15,000 per year tax free I believe. So if its like $60,000 or so you can just ask him to gift a portion each year.
I'll let others chime in with better answers....
I'll let others chime in with better answers....
Posted on 2/8/16 at 1:43 pm to Green Grass Miracle
quote:
How many annual exclusions are available?
The annual exclusion applies to gifts to each donee. In other words, if you give each of your children $11,000 in 2002-2005, $12,000 in 2006-2008, $13,000 in 2009-2012 and $14,000 on or after January 1, 2013, the annual exclusion applies to each gift. The annual exclusion for 2014, 2015, and 2016 is $14,000.
LINK
Posted on 2/8/16 at 1:54 pm to Green Grass Miracle
For the money board there sure has been some poor answers so far.
First, you don't have to pay any taxes on any gift ever. Thats the relative's responsibility.
Second, the relative has something like a million dollar lifetime gift tax exemption. The 14k per year just doesn't count against that amount. May be 2 million now I'm not sure.
Eta, bottom line on taxes is u won't have to pay any taxes on amount and the relative won't have to pay any either unless the amount is over 14k and they have exhausted their 1-2mil lifetime exemption.
First, you don't have to pay any taxes on any gift ever. Thats the relative's responsibility.
Second, the relative has something like a million dollar lifetime gift tax exemption. The 14k per year just doesn't count against that amount. May be 2 million now I'm not sure.
Eta, bottom line on taxes is u won't have to pay any taxes on amount and the relative won't have to pay any either unless the amount is over 14k and they have exhausted their 1-2mil lifetime exemption.
This post was edited on 2/8/16 at 2:05 pm
Posted on 2/8/16 at 2:03 pm to Green Grass Miracle
quote:You wont get taxed....he will
and I'm trying to figure out the best approach to accepting it so that I don't get taxed out the arse
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