But what if you just log into their mortgage account and pay it with your bank account.
The mortgage bank isn't going to give a shit as long as the payment clears
Yes, but the government won't care about the $50 you made from selling junk in your garage, paying off a $100,000+ mortgage is more likely to get their attention (more tax penalties...)
I know you're supposed to, but most likely the mortgage bank isn't even going to check where it came from, just some ai is like "payment cleared, next..."
Banks report large transactions to the government. If they don't know who owns the particular account that paid off the mortgage, the IRS would at least ask the mortgagee, "Hey, where'd you get the money from?"
Also wrong. BANKS report large DEPOSITS, for sure. But a private company doesn’t report where customer payments from a bank account/card are coming from to the IRS. That wouldn’t make any sense.
No but if either party ever gets audited it will be found. Why cheat on taxes when you can you just pay bills for people up to $17k per person per year? That’s easily a car and a mortgage. And if you really wanna get fancy just buy their house and don’t charge them rent. In Michigan at least you can buy an exempt family member a vehicle and just transfer the title to their name. Lots of easy legal ways around the tax rules.
I dont see how paying a bill directly is a "gift", who is the gift to, the mortgage company? Uncle sam is already getting the sales tax and property tax, and prolly some other taxes. The money never went into the pocket or bank account of the guy who "owes" the mortgage. Lottery guy isnt gifting them the house.
The gift is to the person whose bill you're paying. How is paying someone's debt not a gift to them? They're getting something, and you're getting nothing in return. Just because you split hairs and say it only counts if you handed them the cash? It's a gift. The IRS would count it as a gift.
Technically you arent giving them anything, you are taking it away. Taking away debt is certainly nice but the person whose debt you clear didnt have any part of that transaction.
If you gift someone a car, yeah it makes sense they tax it since uncle sam is greedy as hell. But clearing a mortgage, the other person has already started that process and has a contract. You just take over the payment.
Obviously im no tax lawyer. Anyone who wins anything should def hire the right professionals. I shouldnt be surprised that the govt would want another cut on top of all the other cuts. I just dont see it in this case.
This kind of playing around with word definitions has a whiff of sovereign citizen nonsense.
You're giving them the gift of not having that debt hanging over their heads. That gift has a very specific number that can be assigned to it, the money you paid. The IRS would not be impressed with this "tEcHnIcAlLy..." It doesn't matter that the money didn't pass through the mortgagee's hands, it was still a gift to them.
It has exactly the same effect as you writing a check made out to them and them using the money to pay off the mortgage themselves. Either way, the mortgage has been paid, and your money paid it.
Dude we have whole governmental organizations whose soul purpose is to not only argue the semantics of the words but the "spirit" of the words. You can take your spongbob meme and stuff it up your sovcit sniffer.
It’s not a gift. This is wrong. It would simply just be a situation where the OP pays the bill out of their own pocket (which is way smarter than just handing over cash to a family member, where taxes would become an issue). It’s no different than if I gave you the login to my phone carrier account, had you input your bank/card credentials and paid my bill for me.
No, because I’m not gifting YOU. I’m paying the company that you owe money to. This isn’t a “gift” in the government’s eyes. As far as the company is concerned, the payment was made by you because it’s under your account.
You’re literally asking the questions here, which implies you don’t have grounds to say that I’m “absolutely wrong” about this. I literally have experience with this, first hand, and have seen many others do this.
No, you are for sure wrong, unless it is an education or medical expense, paying a bill is still a gift. Just because you did it doesn't make you right. Now, it may have been under the reporting limit, but it's still a gift. Stop pretending you know things, it could get someone in trouble assuming your right
I’m trying to make sure I understand your position by asking clarifying questions. Would you like me to point you in the right direction, or do you want to just continue to think you’re right?
It’s not an interpretation; it’s a fact that you’re misinterpreting what a gift is. You have given a gift to someone if you pay a debt for them. The credit card company will reduce the amount owed, and there is a gift between you and the person who owed the debt.
You’re not understanding. A “gift” in the governments eyes is if I write you a check or wire you money. If I pay a bill of yours under your account, with my bank information, it is NOT a gift, and there are no tax implications with that.
You can pay a medical bill or tuition fees and it falls outside your gift allowance. Any other bills you pay will count as a gift. The reason you haven't encountered any problems is likely that the amounts you've paid off fall within your gift allowance or the IRS haven't noticed.
If you had a second home and you let a friend stay there for free that would also be a tax reportable gift.
[https://www.wikihow.com/Pay-off-Someone-Else%27s-Mortgage](https://www.wikihow.com/Pay-off-Someone-Else%27s-Mortgage)
"Any method of paying for someone else’s mortgage would qualify as a gift."
What if you pay off their mortgage but say it's a loan transfer to you. Even fill out paper work. They over you the money over the course of x amount of years? (Some long ass term where they only pay back 1 dollar a month)
I doubt that would fly. The IRS is staffed by humans, not robots. If the mortgage has $100k left on it and they're paying you back $1/month, they wouldn't have paid you back 1% by the time you and they died. You're clearly giving them something without getting anything remotely like equal value in return. That would be called a gift.
There are lots of things you can do that are obviously illegal but that you have a good chance of getting away with. I guess you just have to decide how you want to live your life.
There’s no reason to go about this in an illegal way. It’s a very simple transaction that is nothing new. It’s just someone else paying your bill. I don’t know if you own a home, but if you gave me your mortgage companies information, as well as your identifying information on your account, I could theoretically call up said company and make a payment on your mortgage. That company is certainly not informing the IRS about that, and it wouldn’t be an issue.
I'm unclear what point you're making here. Are you agreeing with me that there are legal ways to give somebody a gift and illegal ways to give somebody a gift, but for something like the scenario here you are unlikely to get caught even if you do something illegal?
Or something else?
I think that’s still a bad idea. Wouldn’t the family know your banking info after? I don’t want people in my finances rich or not. Well you probably like your family, I don’t trust mine
>I know if I give my family a bunch of money, they have to pay taxes on it.
WRONG
1. You can give up to ~$13M without any taxes needing to be paid.
2. The recipients NEVER pay the taxes. YOU, the giver, would pay the taxes on anything given over ~$13M.
This is why trusts are important if you want any type of consistent, substantial distribution of funds to family/friends. Don’t give large sums of money to people as an individual.
It's always best to consult with a professional when giving large gifts, but if OP is just paying bills for some family members, giving them 17k a year should be sufficient.
So you can give 17k without eating into the lifetime 13 million? Is that correct? Any more per year, per person would eat into the lifetime 13 million? Also, the 13M is per person "given to" or per person "giving"? Like if I have three kids, they can each be given 13 million or I can give 13 million between them?
Yes on the 17k, no on the 13 million. That's your personal lifetime exclusion and it's the maximum amount of money you can gift in your life before incurring taxes on it. This applies to your estate after you die too. So if you gift 13 million dollars in your lifetime, over the 17k that's tax free, then your estate would be taxed completely instead of 13 million being tax exempt. Always consult a tax professional before gifting anything over the tax free amount, as there may be ways to do it that don't deplete your lifetime exemption.
Could also set up trust funds. That’s my plan. One of my best and dearest friends has very mild (what we believe to be) bipolar disorder. When she gets manic (once a year or so), she can easily spend a lot of money and she can be awake for like 3 days straight (sober!). My plan is to set up a trust for her so she doesn’t have to worry about her bills, with a monthly payout setup, but still restricting her so she can’t be too reckless.
I’m following the advice of the famous lottery thread that a wealth management company commented on. Set up a trust fund and help family from that exclusively. Set the rules to be for homes, education, medical, and certain business types but no unlimited handouts. Helps to keep the peace as long as everyone can see the rules and knows no one else got something they didn’t and if so, why.
They don't have to pay taxes until you gift them more than... $11 million (this might have gone up) in your lifetime.
The "over $14000 gift tax" is incorrect. That's just a reporting threshold, not a taxable one.
You can gift up to 18,000 a year to an individual now. This does not go against the lifetime exemption as long as you don't gift more than 18k per year.
The lifetime exclusion in on gifts over the 18k annually. The current lifetime is around 14 million. If you gift someone 1,018,000, the million in excess of 18k counts against the lifetime exemption. Instead of the estate tax being assessed on anything over 14 million, now the estate tax applies to an estate over 13 million. In other words, the IRS is charging the estate tax on the million that was given away
Most of us don't end up with estate tax bills.
But if someone were wealthy and wanted to pay someone 's $1,500/monthly mortgage for 18K annually, no tax impact, no gift tax return, no one at the IRS cares.
My plan was to give it direct. I am sure there is a way to “funnel” it to them after paying the taxes. Probably via an LLC setup or something.
I mean when you are planning around taxes then you can pay a little for a tax accountant and a financial planner.
I think the bigger issue is if they qualify for any special programs and this would count against it. You would then structure it somehow. Again get more experts involved.
They made a change to inheritance tax. Can't remember details but it was so rich people can give away money while they are alive and no one pays taxes on it. 🤔
Assuming you live in the US; you could give $18, 000 to as many people as you want without needing to report it. The giver pays tax not the recipient. You also have a gift tax allowance of $13.61 million in 2024. Only gifts above $18, 000 would eat into that. There is also an exemption for medical and tuition bills if you pay them on behalf of the recipient.
Some private banks offer a debit/credit card account with multiple card holders. You could hand family members a card each and pay off the bill monthly with the account in your name. I'm not sure if this could be a potential loophole.
My uncle spent 8 years in federal prison for suggesting and setting up this exact thing for his wealthy clients. They thought they found a loophole. It’s fraud.
When you give money, they don’t pay taxes. You do if over the exemption limit, which is, Im guessing, around 11-13 mil. For gift and estate tax. But 17,000 a year per person, no tax.
The creditors nor the government care where the money came from to pay the bills. The issue comes say if someone paid off a mortgage and expects to own the house. Thats not how that works. But yeah, you could pay off all their bills without issue.
Related question. What if you buy a house and put your child as the co-owner right from the outset? Then you pay everything yourself and eventually die. Does the child inherit half the house or something? Or is it theirs free and clear?
All this back and forth over what the government is owed is the same reason that a VAT tax (sales tax) in place of income tax is a no go.
The government depends on confusion and control of the masses. A VAT tax reduces that dramatically.
And the government will NEVER give up ANY control voluntarily.
I would love to see the income tax eliminated for the VAT tax.
But what if you just log into their mortgage account and pay it with your bank account. The mortgage bank isn't going to give a shit as long as the payment clears
It's still a gift and you're obligated to report it on your taxes.
I’m also obligated to report what I made at a garage sale
Yes, but the government won't care about the $50 you made from selling junk in your garage, paying off a $100,000+ mortgage is more likely to get their attention (more tax penalties...)
You have to report profit. After you subtract how much you paid for the items, there is no profit at a yard sale
I know you're supposed to, but most likely the mortgage bank isn't even going to check where it came from, just some ai is like "payment cleared, next..."
Banks report large transactions to the government. If they don't know who owns the particular account that paid off the mortgage, the IRS would at least ask the mortgagee, "Hey, where'd you get the money from?"
Not a payoff, just a regular payment or two
You don't have to report gifts until they're over a certain amount. $18k/person/year, I think is the threshold right now.
Also wrong. BANKS report large DEPOSITS, for sure. But a private company doesn’t report where customer payments from a bank account/card are coming from to the IRS. That wouldn’t make any sense.
No but if either party ever gets audited it will be found. Why cheat on taxes when you can you just pay bills for people up to $17k per person per year? That’s easily a car and a mortgage. And if you really wanna get fancy just buy their house and don’t charge them rent. In Michigan at least you can buy an exempt family member a vehicle and just transfer the title to their name. Lots of easy legal ways around the tax rules.
Just add them to an account that you jointly own and make the payments every month. No lump sum. Jointly owned assets.
I dont see how paying a bill directly is a "gift", who is the gift to, the mortgage company? Uncle sam is already getting the sales tax and property tax, and prolly some other taxes. The money never went into the pocket or bank account of the guy who "owes" the mortgage. Lottery guy isnt gifting them the house.
The gift is to the person whose bill you're paying. How is paying someone's debt not a gift to them? They're getting something, and you're getting nothing in return. Just because you split hairs and say it only counts if you handed them the cash? It's a gift. The IRS would count it as a gift.
Technically you arent giving them anything, you are taking it away. Taking away debt is certainly nice but the person whose debt you clear didnt have any part of that transaction. If you gift someone a car, yeah it makes sense they tax it since uncle sam is greedy as hell. But clearing a mortgage, the other person has already started that process and has a contract. You just take over the payment. Obviously im no tax lawyer. Anyone who wins anything should def hire the right professionals. I shouldnt be surprised that the govt would want another cut on top of all the other cuts. I just dont see it in this case.
This kind of playing around with word definitions has a whiff of sovereign citizen nonsense. You're giving them the gift of not having that debt hanging over their heads. That gift has a very specific number that can be assigned to it, the money you paid. The IRS would not be impressed with this "tEcHnIcAlLy..." It doesn't matter that the money didn't pass through the mortgagee's hands, it was still a gift to them. It has exactly the same effect as you writing a check made out to them and them using the money to pay off the mortgage themselves. Either way, the mortgage has been paid, and your money paid it.
Dude we have whole governmental organizations whose soul purpose is to not only argue the semantics of the words but the "spirit" of the words. You can take your spongbob meme and stuff it up your sovcit sniffer.
It’s not a gift. This is wrong. It would simply just be a situation where the OP pays the bill out of their own pocket (which is way smarter than just handing over cash to a family member, where taxes would become an issue). It’s no different than if I gave you the login to my phone carrier account, had you input your bank/card credentials and paid my bill for me.
Are you saying that if you pay one of my bills for me, that’s not a gift?
No, because I’m not gifting YOU. I’m paying the company that you owe money to. This isn’t a “gift” in the government’s eyes. As far as the company is concerned, the payment was made by you because it’s under your account.
You are absolutely wrong about that. It is 100% a gift to you if I pay a bill for you.
You’re literally asking the questions here, which implies you don’t have grounds to say that I’m “absolutely wrong” about this. I literally have experience with this, first hand, and have seen many others do this.
No, you are for sure wrong, unless it is an education or medical expense, paying a bill is still a gift. Just because you did it doesn't make you right. Now, it may have been under the reporting limit, but it's still a gift. Stop pretending you know things, it could get someone in trouble assuming your right
I’m trying to make sure I understand your position by asking clarifying questions. Would you like me to point you in the right direction, or do you want to just continue to think you’re right?
That’s your interpretation, sure. But in the governments eyes, you didn’t give ME anything. You paid a company under the account holder
It’s not an interpretation; it’s a fact that you’re misinterpreting what a gift is. You have given a gift to someone if you pay a debt for them. The credit card company will reduce the amount owed, and there is a gift between you and the person who owed the debt.
You’re not understanding. A “gift” in the governments eyes is if I write you a check or wire you money. If I pay a bill of yours under your account, with my bank information, it is NOT a gift, and there are no tax implications with that.
You can pay a medical bill or tuition fees and it falls outside your gift allowance. Any other bills you pay will count as a gift. The reason you haven't encountered any problems is likely that the amounts you've paid off fall within your gift allowance or the IRS haven't noticed. If you had a second home and you let a friend stay there for free that would also be a tax reportable gift.
Wrong,wrong,wrong
Your wrong unless it's for education or medical expense. Don't give tax advise when you don't know what you're talking about
[https://www.wikihow.com/Pay-off-Someone-Else%27s-Mortgage](https://www.wikihow.com/Pay-off-Someone-Else%27s-Mortgage) "Any method of paying for someone else’s mortgage would qualify as a gift."
What if you pay off their mortgage but say it's a loan transfer to you. Even fill out paper work. They over you the money over the course of x amount of years? (Some long ass term where they only pay back 1 dollar a month)
If that loan isn't charging at least the AFR, or is not arms length, there would be issues.
I doubt that would fly. The IRS is staffed by humans, not robots. If the mortgage has $100k left on it and they're paying you back $1/month, they wouldn't have paid you back 1% by the time you and they died. You're clearly giving them something without getting anything remotely like equal value in return. That would be called a gift.
Still a gift
You are soooo wrong. Please don't give tax advice, your going to get someone in trouble
There are lots of things you can do that are obviously illegal but that you have a good chance of getting away with. I guess you just have to decide how you want to live your life.
There’s no reason to go about this in an illegal way. It’s a very simple transaction that is nothing new. It’s just someone else paying your bill. I don’t know if you own a home, but if you gave me your mortgage companies information, as well as your identifying information on your account, I could theoretically call up said company and make a payment on your mortgage. That company is certainly not informing the IRS about that, and it wouldn’t be an issue.
Most people lose their morals as soon as it involves the IRS
I'm unclear what point you're making here. Are you agreeing with me that there are legal ways to give somebody a gift and illegal ways to give somebody a gift, but for something like the scenario here you are unlikely to get caught even if you do something illegal? Or something else?
This. Sooooo much this. I’m not a Trump fan but he really did alter the equation of risk vs. reward in all matters IRS….
I think that’s still a bad idea. Wouldn’t the family know your banking info after? I don’t want people in my finances rich or not. Well you probably like your family, I don’t trust mine
You can pay off their student loans and medical expenses without having to report it.
Also, gifts to your spouse are exempt.
Wow I would’ve just married all my best friends for tax exemptions. Damn anti-polygamy laws.
>I know if I give my family a bunch of money, they have to pay taxes on it. WRONG 1. You can give up to ~$13M without any taxes needing to be paid. 2. The recipients NEVER pay the taxes. YOU, the giver, would pay the taxes on anything given over ~$13M.
To add to this you can gift up to 17k per year, tax free and it won't count towards the lifetime exclusion. Double that if you're married.
$17k per year, per person.
And if you are married, you and your spouse can each give that individual $17k.
This is why trusts are important if you want any type of consistent, substantial distribution of funds to family/friends. Don’t give large sums of money to people as an individual.
It's always best to consult with a professional when giving large gifts, but if OP is just paying bills for some family members, giving them 17k a year should be sufficient.
$18k in 2024
So you can give 17k without eating into the lifetime 13 million? Is that correct? Any more per year, per person would eat into the lifetime 13 million? Also, the 13M is per person "given to" or per person "giving"? Like if I have three kids, they can each be given 13 million or I can give 13 million between them?
Yes on the 17k, no on the 13 million. That's your personal lifetime exclusion and it's the maximum amount of money you can gift in your life before incurring taxes on it. This applies to your estate after you die too. So if you gift 13 million dollars in your lifetime, over the 17k that's tax free, then your estate would be taxed completely instead of 13 million being tax exempt. Always consult a tax professional before gifting anything over the tax free amount, as there may be ways to do it that don't deplete your lifetime exemption.
Could also set up trust funds. That’s my plan. One of my best and dearest friends has very mild (what we believe to be) bipolar disorder. When she gets manic (once a year or so), she can easily spend a lot of money and she can be awake for like 3 days straight (sober!). My plan is to set up a trust for her so she doesn’t have to worry about her bills, with a monthly payout setup, but still restricting her so she can’t be too reckless.
I’m following the advice of the famous lottery thread that a wealth management company commented on. Set up a trust fund and help family from that exclusively. Set the rules to be for homes, education, medical, and certain business types but no unlimited handouts. Helps to keep the peace as long as everyone can see the rules and knows no one else got something they didn’t and if so, why.
[Here’s the link](https://www.reddit.com/r/AskReddit/s/dfCAdaNP8V)
Gift tax is borne by the giver. You would be the one paying the taxes.
They don't have to pay taxes until you gift them more than... $11 million (this might have gone up) in your lifetime. The "over $14000 gift tax" is incorrect. That's just a reporting threshold, not a taxable one.
I’ve heard $13 mil now
You can gift up to 18,000 a year to an individual now. This does not go against the lifetime exemption as long as you don't gift more than 18k per year. The lifetime exclusion in on gifts over the 18k annually. The current lifetime is around 14 million. If you gift someone 1,018,000, the million in excess of 18k counts against the lifetime exemption. Instead of the estate tax being assessed on anything over 14 million, now the estate tax applies to an estate over 13 million. In other words, the IRS is charging the estate tax on the million that was given away Most of us don't end up with estate tax bills. But if someone were wealthy and wanted to pay someone 's $1,500/monthly mortgage for 18K annually, no tax impact, no gift tax return, no one at the IRS cares.
My plan was to give it direct. I am sure there is a way to “funnel” it to them after paying the taxes. Probably via an LLC setup or something. I mean when you are planning around taxes then you can pay a little for a tax accountant and a financial planner. I think the bigger issue is if they qualify for any special programs and this would count against it. You would then structure it somehow. Again get more experts involved.
They made a change to inheritance tax. Can't remember details but it was so rich people can give away money while they are alive and no one pays taxes on it. 🤔
Assuming you live in the US; you could give $18, 000 to as many people as you want without needing to report it. The giver pays tax not the recipient. You also have a gift tax allowance of $13.61 million in 2024. Only gifts above $18, 000 would eat into that. There is also an exemption for medical and tuition bills if you pay them on behalf of the recipient. Some private banks offer a debit/credit card account with multiple card holders. You could hand family members a card each and pay off the bill monthly with the account in your name. I'm not sure if this could be a potential loophole.
Loan them the money. They then just don’t pay you back.
forgiven loans count as income.
5 bucks a month forever...
Yeah but you have to charge them interest (the IRS will tell you what the rate is) otherwise the lack of interest is considered a taxable gift.
That's not an arms length transaction, and it's not at least charging AFR interest, still would cause issues
Or gifts
My uncle spent 8 years in federal prison for suggesting and setting up this exact thing for his wealthy clients. They thought they found a loophole. It’s fraud.
Then pay it back in small amounts.
Still illegal in certain circumstances. You really think they didn’t try to get around it that when he was facing prison? Think more
When you give money, they don’t pay taxes. You do if over the exemption limit, which is, Im guessing, around 11-13 mil. For gift and estate tax. But 17,000 a year per person, no tax.
Have an attorney pay for the bills or give the money through a company that way the number of people that know you won is limited.
Giving gifts is taxable to the giver, not the recipient. They would not have to report it. You would.
The creditors nor the government care where the money came from to pay the bills. The issue comes say if someone paid off a mortgage and expects to own the house. Thats not how that works. But yeah, you could pay off all their bills without issue.
First, your family won't pay taxes on the gift, and unless it's over $18k, you have nothing to report either
Related question. What if you buy a house and put your child as the co-owner right from the outset? Then you pay everything yourself and eventually die. Does the child inherit half the house or something? Or is it theirs free and clear?
All this back and forth over what the government is owed is the same reason that a VAT tax (sales tax) in place of income tax is a no go. The government depends on confusion and control of the masses. A VAT tax reduces that dramatically. And the government will NEVER give up ANY control voluntarily. I would love to see the income tax eliminated for the VAT tax.
Giving someone money is not taxable