How if at all are engagement rings taxed?
Adam S asked:
Not that I’m going to buy one any time soon but is there really a situation couples are faced with where they have to say, here is an engagement ring, and I also took the liberty of figuring out how much you owe the government if you accept.
Not that I’m going to buy one any time soon but is there really a situation couples are faced with where they have to say, here is an engagement ring, and I also took the liberty of figuring out how much you owe the government if you accept.
January 2nd, 2009 at 8:22 pm
There would be sales tax in most states.
January 3rd, 2009 at 9:03 am
Gifts are not taxable to the recipient. Thus, the person receiving the ring would not owe the government anything.
The person giving the ring might have some tax obligations, however, in some fairly rare circumstances. Anyone can give anyone else $12,000 a year with no gift tax implications at all. I imagine the large majority of engagement rings are under that amount.
If the ring is worth more than $12,000, the giver would have to file a gift tax return with the IRS. However, unless that person had previously given away a lot of money in the past, no taxes would be due. The current lifetime exclusion amount for gift tax purposes is $1 million, meaning that taxes would be owed only if the person had already given as gifts (of more than $12,000 a person per year) amounts adding up to more than $1 million. (It is slightly more complicated, because these amounts have changed over time, but you get the idea).