26 Dec My sister is giving me $40K. Do I need to pay a gift tax?
Photo: pixabay.comQ. My sister, who lives in Pennsylvania, is gifting me $40,000 in 2023. Do I need to pay gift tax on this money?
— Sister
A. That’s a very generous gift from your sister.
The recipient of a gift is not taxed on the gift, regardless of the amount.
Any gift tax is the responsibility of the donor, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.
He said in 2023, the annual federal gift tax exclusion is $17,000. Any excess would go against the donor’s lifetime exclusion, which for 2023, will be $12.92 million, he said.
“The gift of $40,000 would require the donor to file a gift tax return for 2023,” Karu said. “Assuming the donor is below the lifetime exclusion, there will not be a tax.”
As is the case in New Jersey, Pennsylvania does not have a gift tax, he said.
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This story was originally published on Dec. 26. 2022.
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