Tax question- giving money

[NateNLogansDad]

Does anyone know if you gave someone $$$ to pay off a credit card, could you use that as a tax deduction? Would it be better to send the check directly to their card company from my checking account?

 

[NateNLogansDad]

Also, if I got the deduction, would they be paying taxes on it? (It's a pretty good amt)

 

[mickeymaker2003]

Gifts are not tax-deductible unless they are to a registered charitable organization, so there is no tax benefit for you. I don't know how much you are allowed to receive as a tax free gift in a year, but I think at one time it was about $10,000 per person.

 

[disneysteve]

Does anyone know if you gave someone $$$ to pay off a credit card, could you use that as a tax deduction? Would it be better to send the check directly to their card company from my checking account?

Also, if I got the deduction, would they be paying taxes on it? (It's a pretty good amt)

You can gift up to $13,000/year to anyone you wish without triggering the gift tax. If you give more than that, the recipient doesn't have to do anything. Gift tax, if any, is paid by the giver. Chances are you wouldn't owe any tax because there is a lifetime exemption of, I think, $1 million, so this gift would just go toward your lifetime exemption.

No, it would not be tax deductible because you wouldn't be giving the money to a registered non-profit organization. Giving money to friends and family doesn't count as charity.

If you are going to do this, I'd send the money to the CC company directly. You'd probably be pretty unhappy if you gave this person a big check and found out later that they used it for something other than your intended purpose.

Before doing this, though, I'd certainly make sure you know the whole story. How did they end up in so much debt? What have they changed to make sure it never happens again? And can you truly afford to make the gift without impacting your own personal finances?

 

[NateNLogansDad]

Any idea if it were sent directly to the Credit Card, would it still be considered a gift?

 

[kaytieeldr]

"Gift" for what purpose? For the government's concern in relation to the $13,000 annual maximum? Or for the recipient's concern to show them that you 'gave' them this as their/a gift? If the latter, just print up a nice little note explaining the gift.

 

[cglaura]

Any idea if it were sent directly to the Credit Card, would it still be considered a gift?

If you didn't incur the debt/charges, then I'd say yes, you are paying off something they needed paid, that is a gift. If they were your purchases, then you could maybe use them as a deduction under normal tax procedure with receipts and documentation, etc.

 

[Cheshire Figment]

The only time you can get a deduction for a gift benefitting an individual directly is if the person is related to you and you are paying their medical bills directly. Then it is considered a medical expense for you, subject of course to the general 7.5% AGI minimum floor for medical deductions.

 

[Swimalie]

Any amount over $10,000 would trigger an alert from the agency that checks money laundering, too.

 

[disneychrista]

There is NO WAY for you to get a tax break for paying someone else's bills.

 

[Cheshire Figment]

Any amount over $10,000 would trigger an alert from the agency that checks money laundering, too.

The $10,000 figure only involves CASH transactions at a bank.

There is NO WAY for you to get a tax break for paying someone else's bills.

See Pages 4 and 5 of IRS Publication 502 related to my answer above.

Mike (CPA)

 

[Swimalie]

The $10,000 figure only involves CASH transactions at a bank.


Mike (CPA)

Let me correct that from my husband who works in the agency who does the money laundering investigations for the Feds. It's actually $12,000 and it's any type of personal transactions that involve a bank (cash or check). This explains it well. http://www.fairmark.com/begin/gifts.htm

 

[NeverlandClub23]

I will PM you my address and/or credit card company if you wanted to try it out on someone first

 

[Crystal824]

No, you can't get a tax deduction for making a gift. You are probably confusing the bad debt deduction with a gift. That is a deduction you get if you made a loan to someone that was not repaid according to terms. Bascially, you get a deduction and send them a 1099, which they have to consider income.

 

[Cheshire Figment]

Let me correct that from my husband who works in the agency who does the money laundering investigations for the Feds. It's actually $12,000 and it's any type of personal transactions that involve a bank (cash or check). This explains it well. http://www.fairmark.com/begin/gifts.htm

1. Here is the official word from the Office of the Comptroller of the Currency:

IRS Form 4789 Currency Transaction Report (CTR): A CTR must be filed for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through or to a financial institution, which involves a transaction in currency of more than $10,000. Multiple currency transactions must be treated as a single transaction if the financial institution has knowledge that: (a) they are conducted by or on behalf of the same person; and, (b) they result in cash received or disbursed by the financial institution of more than $10,000. (31 CFR 103.22)

2. And my sources are actual government publications while your source is a for-profit company.

Mike (CPA)