IRS Publication 525 - Taxable and Non Taxable Income
IRS Publication 525 – Taxable and Non Taxable Income
IRS Rules on Gifts
IRS Rules on Gifts
Publication 559 Survivors, Executors, and Administrators
Publication 559 Survivors,
Executors, and
Administrators
Covered CA - Countable Sources of Income
Covered CA – Countable Sources of Income – Getting to MAGI and Line 37 AGI

How does Gift Income count towards MAGI – Modified Adjusted Gross Income for Covered CA Subsidies?

The receiver of a gift does not have to claim the gift on their income tax, thus gifts don’t count for Covered CA subsidies, MAGI Income Line 37* of your 1040  or MAGI-Medi-Cal Qualification.   Learn More—-Covered CA Countable Sources of Income *  IRS Publication #525 Page 32

The giver of the gift  does not have to pay tax on gifts that are less than the annual exclusion limit, which generally changes every year.  Currently, the annual exclusion is $14,000 per recipient. In other words, you can give up to $14,000 to each of your children this year without having to pay any gift tax.

Thus, if you don’t have to show the gifts on your 1040, it’s not MAGI income for Covered CA.   We are not attorney’s or tax advisers – double check with your professional adviser.

FAQ’s

 

Tax Tips to Help You Determine if your Gift is Taxable

If you gave money or property to someone as a gift, you may wonder about the federal gift tax. Many gifts are not subject to the gift tax. Here are seven tax tips for gifts and the gift tax.

  1. Nontaxable Gifts. The general rule is that any gift is a taxable gift. However, there are exceptions to this rule. The following are nontaxable gifts:
  • Gifts that do not exceed the annual exclusion for the calendar year,
  • Tuition or medical expenses you paid directly to a medical or educational institution for someone,
  • Gifts to your spouse
  • Gifts to a political organization for its use, and
  • Gifts to charities.
  1. Annual Exclusion. For 2015, the annual exclusion is $14,000. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you give a gift to someone else, the gift tax usually does not apply until the value of the gift exceeds the annual exclusion for the year.
  2. No Tax on Recipient. Generally, the person who receives your gift will not have to pay taxes on it.
  3. Gifts Not Deductible. Making a gift does not ordinarily affect your taxes. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
  4. Forgiven Debt and Certain Loans. The gift tax may also apply when you forgive a debt or give a loan that is interest-free or below the market interest rate.
  5. Gift-Splitting. You and your spouse can give a gift up to $28,000 to a third party without making it a taxable gift. You can consider that one-half of the gift be given by you and one-half by your spouse.
  6. Filing Requirement. You must file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, if any of the following apply:
  • You gave gifts to at least one person (other than your spouse) that amount to more   than the annual exclusion for the year.
  • You and your spouse are splitting a gift. This is true even if half of the split gift is less than the annual exclusion.
  • You gave someone (other than your spouse) a gift of a future interest that they can’t actually possess, enjoy, or from which they’ll receive income later.
  • You gave your spouse an interest in property that will terminate due to a future event.

For more information, see Publication 559, Survivors, Executors, and Administrators. You can view, download and print tax products on IRS.gov/forms anytime.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

IRS YouTube Videos:

IRS Tax Tip 2016-57

3. There Are Also Educational and Medical Exclusions

Payments that you make on someone’s behalf for qualified tuition or medical expenses do not count towards the annual limit for gift tax purposes. However, your payment(s) must be made directly to a qualifying educational organization or medical care provider in order to qualify for the exclusion. You can also place funds directly into a 529 education savings plan to avoid the gift tax — but note that certain rules apply. Learn More ⇒  IRS.com (NOT a government Site!)

 

Links & Resources

Publication 559 PDF      (HTML)  Survivors, Executors, and Administrators

IRS publication 950, Be careful, might be out of date – Introduction to Estate and Gift Taxes

Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return
Instructions for Form 709

Wikipedia on Gift Taxes

26 USC 102 Gifts & Inheritances  Cornell Law Website

 

2 comments on “Gift Income?

  1. Will a letter from someone saying they will gift me $X amount by Y [December 31st] if I don’t make [enough] equivalent money [MAGI Income *** Line 37 1040] from my own business to qualify for Covered CA subsidies, rather than MAGI Medi-Cal be sufficient for proof of income?

    If so, what are the minimum requirements for X and Y?

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