www.Hondafinancialservices.com

I know this guy who used to drive an “old” 1991 Honda Civic. He’d bought it during his senior year in high school so he wouldn’t have to take the bus again and pretty much drove it until it couldn’t be driven anymore. Over 250,000 miles and numerous dents later, the old girl was just about ready to give up the ghost. Seriously, I wish I had pictures to show of this car – in the end, it looked like it had gotten into its fair share of brawls with other cars, but it kept right on running — I’ll give it that. When it came time for a new set of wheels, however, he had a bit of a problem though – he wasn’t exactly prepared to buy a new(er) car, meaning things like driving to work or going out on weekends were about to get a little trickier.

Enter the loving grandmother. She had set aside some funds for just such an occasion, and was prepared to loan the kid a pretty generous amount of money to pay for a new car. She didn’t present it with a bow like in the commercials, but she gave enough to get him seriously looking. There was, however, one potential problem with receiving that much money – a gift tax.

Parents and grandparents everywhere are probably pretty familiar with this, especially if they love to throw that kind of money at their kids/grandkids. Anyone who has ever purchased a car for their kid as a graduation present knows that they’re old uncle Sam (you know, the one everyone in the family is generally okay with until he asks to borrow money) just can’t resist getting in on that action too.

What IS the gift tax?

As of 2010, any gift given of more than $13,000 is subject to being taxed. So as long as you don’t give away more than $13,000 a year in gifts (why the hell WOULD you?), you’ll be exempt from this. Grandma lucked out; the guy said she didn’t send him THAT much in funds, and as a result, the poor kid won’t be trolling for ladies in a Maserati anytime soon.

So, what qualifies as a gift?

A gift (in this sense anyway) is something of real value someone gives to you without really expecting any form of repayment. And when I say something of real value, I don’t mean a friend buying you a cold lemonade on a hot summer’s day – I mean something like a car, boat, or a piece of property. Even if your parents were to sell you a car rather than just give you one, if they sell it to you at a significantly reduced rate from what they paid for it – say, a couple thousand dollars less – that constitutes as a gift.

One important exception to the rule though, is that any form of financial support from your parents while they still claim you as a dependent is NOT considered a tax. So as long as your parents claim you on their taxes, they can give you all the money they want – free of charge!

Can I avoid the tax?

Sure, you can! Just don’t give ridiculously expensive gifts to people and you’re good to go! There are exclusions to the tax as well. Anyone giving a gift to charity, a political organization (big surprise there), or gifts between spouses is exempt from being taxed on it.

You can also avoid it if you’re giving someone money for school or a medical expense, just so long as you pay the institution itself, and not the individual person.

So don’t be afraid to give a little. Just be aware that if you plan on giving a lot, you’ll have to part with a little more as well.

Related to : www.bigcharts.com