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If you are walking down the beach and find a $20 bill on the ground, you are required to report it as income. The only way that I know of that you can legally
by purple-again 9y ago
If you are walking down the beach and find a $20 bill on the ground, you are required to report it as income.
The only way that I know of that you can legally enrich yourself without paying taxes is via a direct gift and that’s because the giver pays tax instead of you.
- gxs 9y agoWorth mentioning that there exists a $5MM lifetime max that any individual can gift before paying taxes. A common misconception is that you have to pay tax on every gift you make, but as long as you’re under that $5MM all you have to do is report it.
- adanto6840 9y agoNot that it would probably ever apply to me, but I'm curious if that's per "individual gift giver - giver receiver" pair? Or is it the case that it's solely per individual gift _giver_? As in, would receiving a $500 gift from Bill Gates (who presumably has met the $5MM lifetime threshold) be fully taxable? Just random Sunday curiousness. :)
- gxs 9y agoIndividual gift giver. So lifetime max per person! Not too shabby.
- purple-again 9y agoLifetime max $5,000,000. Yearly max changes but hovers around $15k per person (wife and husband diffrent people!) and doesn’t touch yearly max.
- deleted 9y ago[deleted]
- isostatic 9y agoWould have to be per giver, otherwise it would be trivial to avoid (want Dave to get another $1m, either give $2m and have the taxes taken, or give $1.1m to Joe Bloggs, who gives $1m to Dave and keeps the rest.
- deleted 9y ago[deleted]
- mindslight 9y agoFor what GP is talking about, it's per giver. It's a combined gift/estate tax, with the goal of preventing someone from giving to escape their eventual estate tax burden. But that isn't really relevant for the average person - gifts below the annual exclusion amount (something like $14k) are exempt from reporting/recording/tallying at your death. And this does apply per each pair of people per year, so in your scenario BG would have nothing to report.
- ghfbjdhhv 9y agoAnd if your gifts are less than $15,000 per year, you don’t even have to report it. So the vast majority of gifts are not supposed to be taxed or reported.
- akcreek 9y agoThis is how my wife and I are saving for our son's future. We gift him money (you can each gift up to the limit without reporting it or decreasing the lifetime gift limit) and then we invest the money on his behalf via a UTMA account with Vanguard. He'll owe taxes upon withdrawal in the future, 17 years from now at the earliest, but he'll also have full freedom to use the money any way he sees fit. So school, starting a business, buying a house or letting the investment ride until retirement.
- kgwgk 9y agoOr blackjack and hookers...
- akcreek 9y agoIt's possible. I hope that he'll use the money in ways his mom and I would consider to be more constructive, but once he is old enough he gets control of the account and we have no say in it. Fingers crossed.
- lsc 9y agoYou might want to look into putting some of that money into a 529 plan; that allows the kid to pay for college without paying taxes on the gains. It's a risk if the kid doesn't end up going to college; you end up paying, I think, regular taxes on the earnings plus like 10% penalty. Still, 17 years of tax free growth would be a pretty good reward if the kid does go to school.
- Berobero 9y ago> $15,000 per year Importantly, per person receiving. In principle you have a virtually infinite tax-free gift giving exception available if you distribute your assets to enough people.
- purple-again 9y agoFurther complicating the situation, there is a roughly $30k (don’t bother looking it up) exception per year that allows couples to gift under that amount to individuals without affecting my lifetime $5m exclusion. So if we have 5 children and 10 grandchildren we are giving away $450,000 a year to our family and still get another $5M when we die gift tax free.
- hkmurakami 9y agoThat doubled with the tax reform. It's roughly 10.x million per person now.
- gxs 9y agoWow no way, thanks for the update.
- hkmurakami 9y agoExpires 2025 iirc
- deleted 9y ago[deleted]
- jupiter90000 9y agoOne other way is selling a home -- in certain circumstances, one can get $250k (single filer) or $500k (married filer) gains from the home sale tax-free. https://www.irs.gov/taxtopics/tc701 https://www.irs.gov/taxtopics/tc701
- asfasgasg 9y agoBuy a home in the Bay Area four years ago and sell it today. You might even exceed the exclusion.
- loeg 9y agoThere is a 0% capital gains tax bracket, for example. Additionally, below a certain (low) level of wage income deductions and credits can negate nominal income tax owed, for an effective zero or even negative (with credits) tax rate.
- jmalicki 9y agoYes, but there are still reporting requirements, and you have to report and pay what may be owed.
- loeg 9y agoThe comment under reply was talking about payment requirements, not filing requirements: > The only way that I know of that you can legally enrich yourself without paying taxes…
- makemoniesonlin 9y agoIsn't it likely the person who lost the $20 bill already paid tax on it?
- hippich 9y agoas well as employer, who paid tax on that $20 to the person who lost it as well as person who found it, who paid tax on that $20, who paid employer for service, who paid person who lost it this could be non stop recursion :)
- jmalicki 9y agoThere's no rule that says only one person pays income tax. For example: 1) You make $20 from employment, and pay $5 income tax. 2) I sell you a sandwich for $15. I still owe income tax for the money I made selling you a sandwich, even though you already paid tax.
- tzs 9y ago> The only way that I know of that you can legally enrich yourself without paying taxes is via a direct gift and that’s because the giver pays tax instead of you How about tax-free bonds?
- sgroppino 9y agoEven if it's the $20 bill you lost the day before?
- parliament32 9y agoIn the crypto context, you add a $20 loss and a $20 cap gain, which nets 0 and equals 0 tax.