Do I have to pay tax if my parents give me money?

How gifts from parents to children are taxedQ: I am about to receive some money from my parents (about $12,000-15,000) to put towards my student loan. What will this do to my tax b

Do I have to pay tax if my parents give me money?

How gifts from parents to children are taxed

Q: I am about to receive some money from my parents (about $12,000-15,000) to put towards my student loan. What will this do to my tax bracket and theirs?

A: The simple answer is that simple cash gifts are non-taxable. Period.

Your parents can give you any lump sum at all, and you dont have to pay any tax on it. It doesnt get reported on your return, so it cant affect your tax bracket.

Now for every upside theres a downside. In this case, its that if your parents give you the money as a gift, they cant get a tax *break* for it either. No tax in, no tax out.

If you want to get fancy, and if one of your parents is in a high tax bracket AND has a business in which you sometimes help out, they could call the money payment for your help. The catch is, the money theyre paying you must be no more than what they would pay a non-related person to do the same work.

Within that limitation, you could try to calculate the payment to achieve a split of some sort (taxable pay + non-taxable gift = $15,000) in such a way that it provides a tax benefit overall. Because its pay rather than a gift, the money would increase your taxes, but it might reduce your parents taxes by a larger amount, so overall it would be a win for the family.

If you want to do that youd best sit down with your accountant and everyones numbers to determine the optimal split.

The rules get more complicated if the gift is not cash, i.e., if it is in the form of stocks, property, or other things that can increase in value while in your possessionbut thats a topic for another Tip.

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