How does Gift Income count towards
MAGI – Modified Adjusted Gross Income
for Covered CA Subsidies?
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Gifts – Not Counted
The giver of the gift does not have to pay tax on gifts that are less than the annual exclusion limit, which generally changes every year. Currently, the annual exclusion is $14,000 per recipient. In other words, you can give up to $14,000 to each of your children this year without having to pay any gift tax.
Thus, if you don’t have to show the gifts on your 1040, it’s not MAGI income for Covered CA.
We are not attorney’s or tax advisers – double check with your professional adviser or VITA Volunteers Income Tax Assistance.
The general rule is that any gift is a taxable gift.
The following are nontaxable gifts:
- Gifts that do not exceed the annual exclusion for the calendar year,
- Tuition or medical expenses you paid directly to a medical or educational institution for someone,
- Gifts to your spouse
- Gifts to a political organization for its use, and
- Gifts to charities.
- Annual Exclusion. For 2015, the annual exclusion is $14,000. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you give a gift to someone else, the gift tax usually does not apply until the value of the gift exceeds the annual exclusion for the year.
- No Tax on Recipient. Generally, the person who receives your gift will not have to pay taxes on it.
- Gifts Not Deductible. Making a gift does not ordinarily affect your taxes. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
- Forgiven Debt and Certain Loans. The gift tax may also apply when you forgive a debt or give a loan that is interest-free or below the market interest rate.
- Gift-Splitting. You and your spouse can give a gift up to $28,000 to a third party without making it a taxable gift. You can consider that one-half of the gift be given by you and one-half by your spouse.
- Filing Requirement. You must file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, if any of the following apply:
- You gave gifts to at least one person (other than your spouse) that amount to more than the annual exclusion for the year.
- You and your spouse are splitting a gift. This is true even if half of the split gift is less than the annual exclusion.
- You gave someone (other than your spouse) a gift of a future interest that they can’t actually possess, enjoy, or from which they’ll receive income later.
- You gave your spouse an interest in property that will terminate due to a future event.
- For more information, see Publication 559, Survivors, Executors, and Administrators.
Educational and Medical Exclusions
Payments that you make on someone’s behalf for qualified tuition or medical expenses do not count towards the annual limit for gift tax purposes.
However, your payment(s) must be made directly to a qualifying educational organization or medical care provider in order to qualify for the exclusion. You can also place funds directly into a 529 education savings plan to avoid the gift tax — but note that certain rules apply. IRS.com (NOT a government Site!)
- Who pays the gift tax?
- What is considered a gift?
- What can be excluded from gifts?
- May I deduct gifts on my income tax return?
- How many annual exclusions are available?
- What if my spouse and I want to give away property that we own together?
- What other information do I need to include with the return?
- What is “Fair Market Value?”
- Whom should I hire to represent me and prepare and file the return?
- Do I have to talk to the IRS during an examination?
- What if I disagree with the examination proposals?
- What if I sell property that has been given to me?
- Can a married same sex donor claim the gift tax marital deduction for a transfer to his or her spouse?
Links & Resources
Survivors, Executors, and Administrators IRS publication 950, Be careful, might be out of date –
Introduction to Estate and Gift Taxes •