Everyday Cheapskate: Will I Be Taxed on My Son's Generosity?

Mary Hunt on Dec 3, 2024

Dear Cheapskate: I am retired and my son wants to give me money to buy a house as a gift. Will I be taxed on the money? If so, are there ways to avoid or reduce the amount I will be taxed? -- Lucy

Dear Lucy: Gifts between individuals are tax-free for the recipient. That means you, as the fortunate recipient of your son's generosity, don't have to worry about paying taxes on this gift. The responsibility for any potential gift tax falls squarely on the giver -- your son in this case. Now, let's unpack the details.

How much can your son give without taxes? For 2024, the annual gift tax exclusion is $18,000 per recipient. This means your son can give you up to $18,000 in a year without having to report it to the IRS. If the gift exceeds that amount, the excess is applied to his lifetime gift tax exemption, which is $13.61 million for 2024. That's a pretty high bar, so unless your son has already been exceptionally generous in his lifetime, he likely won't owe any taxes. However, he would need to file IRS Form 709 to report the gift.

State Gift Taxes: Connecticut is currently the only state that imposes its own gift tax, but it's based on total taxable gifts over $9.1 million, so this isn't likely to apply here.

Ways to Minimize Gift Tax Implications: If the amount your son wants to give exceeds the annual exclusion, he could spread the gift over multiple years or split the gift with his spouse (if he's married). This way, he could gift you $36,000 in 2024 without affecting his lifetime exemption.

Keeping in mind that I am not a tax professional and these are my options, your son should consult a tax professional to ensure everything is handled correctly.

Dear Cheapskate: I had unsatisfactory work done by a painting contractor, so I disputed the credit card payment. However, the credit card company insists I must pay the bill. Isn't this the same as stopping payment on a check? I used a credit card specifically to have this backup in case something went wrong. -- Phil

Dear Phil: Disputing a charge on a credit card is one of the protections that makes this form of payment appealing. Under federal law (the Fair Credit Billing Act), when you dispute a charge, the credit card issuer is required to investigate your claim. They must withhold payment or credit your account during the investigation, provided the dispute meets certain criteria.

Here's the fine print:

The amount in question must exceed $50.

The transaction must have occurred in your home state or within 100 miles of your billing address (though online purchases are usually treated differently).

You must have attempted to resolve the issue with the merchant directly before disputing the charge.

It's important to note that credit card disputes typically address billing errors or cases of fraud. Disputes related to quality or dissatisfaction with services are a bit trickier, as credit card issuers may require substantial evidence to rule in your favor.

From your description, this situation seems to be a matter of quality and customer satisfaction rather than a billing error. While continuing to work directly with the contractor may feel frustrating, it may still be your best path to a resolution. If you're unable to resolve the issue, consider these next steps:

Contact your state's consumer protection agency. They may be able to mediate or provide further guidance. Visit www.consumeraction.gov to find contact information for your state agency.

If you must pay the credit card bill to protect your credit score, you can file a claim against the contractor in your county's small claims court for reimbursement. This is often a straightforward and low-cost process.

By taking these steps, you'll have explored every possible avenue to resolve the situation.

Hope that helps!

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Mary invites you to visit her at EverydayCheapskate.com, where this column is archived complete with links and resources for all recommended products and services. Mary invites questions and comments at https://www.everydaycheapskate.com/contact/, "Ask Mary." This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of EverydayCheapskate.com, a frugal living blog, and the author of the book "Debt-Proof Living."