Question 1

What is a gift affidavit?

Accepted Answer

A gift affidavit is a document that can be used to transfer property from one person (Donor) to another (Donee), without the need for an actual sale or exchange. The gift affidavit ensures that the gift was given freely with no expectation of any kind of return or exchange. They’re great for helping you avoid paying taxes on an item if you’re giving it away to someone related to you.

Question 2

Does a gift affidavit need to be notarized?

Accepted Answer

Yes, a gift affidavit needs to be notarized to ensure its legitimacy. Notaries are legally required to verify the identity of any person who signs a document. They also must certify that all parties signing the document were present during the signing process. This helps prevent fraud because it ensures that no one has forged any signatures on the document.

In addition, if there are any questions about authenticity later (for example, if someone claims someone else signed for them without their knowledge), it can be shown that all parties were present during the signing process and that nobody was coerced into signing anything against their wishes.

Question 3

How do I avoid gift tax?

Accepted Answer

The best way to avoid gift tax without affecting your exclusion status is to structure your gifts over time by giving less than the annual exclusion. You can avoid gift tax through gift tax exclusions and deductions such as the following:

Annual Exclusion: The first $16,000 (as of 2022) you give away per calendar year is exempt from gift tax.
Lifetime Exclusion: If you want to give more than your annual exclusion, you can use your lifetime exclusion which allows you to give up to $12.06 million (as of 2022) without incurring any gift taxes.
Charitable Deduction: Gifts to qualifying charities or those approved by the IRS will not incur gift tax.
Medical Expense Deduction: Gifts that cover an individual’s medical expenses and are paid directly to the medical service providers will not incur gift tax.
Educational Expense Deduction: Gifts that cover an individual’s tuition expenses and are paid directly to the educational institute will not incur gift tax.
Marital Deduction: Gifts to your spouse will not incur gift tax.

Additionally, monetary gifts to political organizations for their use will not incur gift tax.

Keep track of all gifts you’ve given in the past year (or more if possible) to keep a record of all the gifts made and received by yourself or your family members in that period.

Question 4

Who pays a gift tax?

Accepted Answer

Gift taxes are paid by the person who gives the gift (Donor), not the person receiving it (Donee). The person giving the gift must report it on their tax return and pay any applicable taxes.

Question 5

Do I need to declare a gift as income?

Accepted Answer

For federal tax purposes, a gift is not considered income and you are not required to declare it as such. Gift tax differs from income taxes as its purpose is to prevent taxpayers from giving money and items of value to others to avoid paying income taxes.

However, there are some instances when a gift is considered income. For example, if you receive a gift contingent upon your performing certain services or conditions set by the donor, then it is considered wages and must be reported as such on your tax return.

Gift Affidavit Template

Gift Affidavit Template

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