Gifting Retro Pay Possible Tax Consequences

[Tbird]

here's a question and i'm just not sure what the answer is, anyone out there want to take a stab at this?

if you receive retro pay, non-taxable to you, and then you in turn gift it to someone else, will that person then be responsible for taxes on that gift?

[JR Reihs]

Betty,

Stop thinking about this, you are in the clear. Take time with the hubby and go enjoy yourself, you fought the battle and won.

[Josephine]

JR Reihs,

Thanks,

Betty

[tssnave]

Betty,

I few disclaimers first: I am not an accountant, though I am familiar with running books. I am married but live in another state than you do.

Now, having said that, here's my understanding of your situation: since you and your husband are married and, I assume, filing joint federal and state taxes, and your VA income is NOT taxable by either the feds or the state, then you are simply transferring marital assests to him which imposes no penalty. If it were taxable money you both would have already paid the tax on your joint returns but since it's not taxable then it doesn't suddenly become taxable just because you give it to him. I think you said that he put it in another bank, which after reading Free's story, makes a LOT of sense to me.

It is only when you start giving over $12k to someone other than your spouse that you need to look at the IRS regs because you would have to pay estate tax and the receiver would have to pay income tax.

I agree with JR - you're fine.

However, having said that - for anyone who is contemplating giving > $12k to anyone, I would strongly suggest you talk to a CPA first to understand both the IRS and state estate tax and income tax implications. A good CPA in our area runs $125 - $150/hr and anyone who's ever been on the wrong side of the IRS can tell you it's a good investment to talk to a CPA for money matters such as this BEFORE you take any action.

Hope this helps,

TS Snave