JustTricia
Pearl Clutcher
Posts: 2,829 
Location: Indianapolis
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Post by JustTricia on Jul 21, 2015 16:34:45 GMT
Purely hypothetical, of course, but a group of us have started playing the lottery. One friend wants to drop out because she's in a marriage where her husband is HORRIBLE with money and she's afraid he'll blow it all if we win and they've got a ton of debt. I know you can gift money to relatives under a certain amount per year, but what can you do for non-relatives?
Say I win the lottery. Can I pay off a large lawyer bill, car, or credit card for her with a check in my name? Does that end up being a gift that she'd be taxed on? What if it was cash?
And of course, the chance of us actually winning is small, but I just took a shower and my mind races while in the shower, so all these scenarios popped in my head! :-)
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AnotherPea
Pearl Clutcher
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Post by AnotherPea on Jul 21, 2015 16:37:49 GMT
not an accountant, but I don't think it matters what the relationship is. You can gift to a friend just as you would a relative.
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JustTricia
Pearl Clutcher
Posts: 2,829
Location: Indianapolis
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Post by JustTricia on Jul 21, 2015 16:43:53 GMT
But she'd have tax consequences on that, correct? I mentioned gifting to family below a certain amount because of inheritance tax. I'm trying to come up with a (hypothetical of course) scenario that wouldn't cost her money she didn't have. Sort of like avoiding the Oprah car situation.
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Post by ktdoesntscrap on Jul 21, 2015 16:48:33 GMT
I think if you pay things off you don't have to count it as a gift I know a lot of grandparents who pay for their grandkids to go to private school or college, then its not a gift, if the money goes directly to the bill... not to the grand kid |
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Post by Dori~Mama~Bear on Jul 21, 2015 16:51:19 GMT
YOu could always send the checks directly to who she owes the money too. then she has the bills paid but has not actually received any money so there for it she not taxed.
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Deleted
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May 21, 2024 0:19:52 GMT
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Post by Deleted on Jul 21, 2015 16:52:44 GMT
Purely hypothetical, of course, but a group of us have started playing the lottery. One friend wants to drop out because she's in a marriage where her husband is HORRIBLE with money and she's afraid he'll blow it all if we win and they've got a ton of debt. I know you can gift money to relatives under a certain amount per year, but what can you do for non-relatives? Say I win the lottery. Can I pay off a large lawyer bill, car, or credit card for her with a check in my name? Does that end up being a gift that she'd be taxed on? What if it was cash? And of course, the chance of us actually winning is small, but I just took a shower and my mind races while in the shower, so all these scenarios popped in my head! :-) You can pay a bill directly and she wouldn't be taxed. Straight from the irs: www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes |
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Post by scrappyoutlaw on Jul 21, 2015 16:53:21 GMT
I believe a gift under 14K is not taxed. Someone can correct me if I'm wrong.  |
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JustTricia
Pearl Clutcher
Posts: 2,829
Location: Indianapolis
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Post by JustTricia on Jul 21, 2015 16:53:57 GMT
I think if you pay things off you don't have to count it as a gift I know a lot of grandparents who pay for their grandkids to go to private school or college, then its not a gift, if the money goes directly to the bill... not to the grand kid Interesting point. I guess I still looked at that as inheritance since they're still related. |
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mlana
Pearl Clutcher
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Post by mlana on Jul 21, 2015 16:59:42 GMT
She wouldn't have tax consequences from the gift - you would!
We had to look into this because MIL wanted to leave her share of the family home to be split between her sons equally. BIL had sold his home, moved in with MIL after she and FIL separated, and had cared for her and the home from then on. He had made repairs and built MIL a suite out of his own home sale funds. DH felt like BIL should inherit the full house, no just a share. If MIL just left it to BIL, then we had no liability. If she left it to be split between them, then DH would have to give it to BIL so much at a time or we would have to pay a gift tax penalty.
We didn't realize MIL's mind had already started to wander, and we had a devil of a time making her understand what we were asking her to do. She actually called DH and told him that I was trying to steal her house because I was the one who sat her and BIL down and explained to them about changing her will.
Marcy
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JustTricia
Pearl Clutcher
Posts: 2,829
Location: Indianapolis
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Post by JustTricia on Jul 21, 2015 17:10:50 GMT
YOu could always send the checks directly to who she owes the money too. then she has the bills paid but has not actually received any money so there for it she not taxed. This and the answer from @volt are exactly what I was looking for. I was hoping that was the case if I paid it directly. Thanks, hypothetically! Now to just keep playing the lottery and win enough to help her out! |
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Post by Dori~Mama~Bear on Jul 21, 2015 17:14:04 GMT
Win some for me.
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georgiapea
Drama Llama
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Post by georgiapea on Jul 21, 2015 17:19:39 GMT
That's a great thing to think of doing for your co-worker.
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JustTricia
Pearl Clutcher
Posts: 2,829
Location: Indianapolis
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Post by JustTricia on Jul 21, 2015 17:25:21 GMT
That's a great thing to think of doing for your co-worker. She'd do the same for me. ☺️ |
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Post by its me mg on Jul 21, 2015 17:33:28 GMT
Inheritance tax is 10K gifting without reporting. Not sure how it would work with the lotto.
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Post by Darcy Collins on Jul 21, 2015 17:43:39 GMT
You can gift up to $14,000 annually - per person. So a couple can gift $28,000 to one individual or $56,000 to a couple. If the gift amount exceeds the annual limit the DONOR has to file a gift tax return showing the amount of excess. It counts against their lifetime limit and would ultimately be settled with their estate. Unless the estate and all previous excess gifts ultimately exceeds the estate tax limit of $5.4 million - it's all irrelevant.
You can pay SOME bills directly to the institution and avoid the gift tax issue entirely. Currently tuition for education and medical bills paid directly to the provider are excluded. You can NOT just pay any bill directly and have it excluded from the gift tax.
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Post by papersilly on Jul 21, 2015 17:45:55 GMT
if I won a huge lottery and I was paying off people's bills, I would absorb the tax consequences. if, by any chance, they owed taxes on my gift, I would give them the money to pay the taxes. if they blow the tax money on something else other than the taxes owed and later bitch about the taxes, guess who gets crossed off all future gift giving? to avoid all that, I would just pay off the bills directly.
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Post by ktdoesntscrap on Jul 21, 2015 17:55:27 GMT
You will be taxed on your winnings no matter what you do with the money.
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Post by genny on Jul 21, 2015 18:19:45 GMT
Good to know while I'm spending my fantasy winnings. I see the lotto billboard on the way home every day and it pops into my mind on occasion what I would do with it all. I get great joy just thinking about paying off my house in one fell swoop and helping my family and closest friends out.
A local man that is a friend of a friend just won 2.5 million on a scratch off.
A man my sister works with one 1 million on a scratch-off.
A guy we know through another friend won the $5k a week for life game.
A close friend of ours won $75k on Fantasy 5.
I can happen!!
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Deleted
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May 21, 2024 0:19:52 GMT
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Post by Deleted on Jul 21, 2015 18:25:08 GMT
This is interesting. DH and I always used to fantasize that if we won the lottery, how cool it would be to pay off the mortgages of our dearest friends/relatives. I never really thought about the tax consequences, but like someone else said I guess we would have to take care, otherwise they would be annoyed instead of grateful, LOL.
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Post by mommaho on Jul 21, 2015 18:42:25 GMT
I had to laugh at your comment about doing your best thinking in the shower! I do that as well but usually forget it by the time I'm done!
Looks like you got some great advice and good luck!
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