What if someone wants to give you a Bank Account as a gift. General tax law says that with regard to bank accounts, if your name is added to the bank account and you do not take any money out of the account, there is no taxable gift. The interest earned on the account will be taxed to the person whose social security number is on the account. If the original owner’s social security number has been on the bank account, the interest income will go to the original owner and he or she will be responsible for the taxes on the account. Some things will change if the original owner takes his or her name completely off of the bank account or if you take money out of the account. If the owner takes his or her name off of the bank account, the owner will be giving you the whole bank account as a gift. At the same time, any money that you take out of the account is a taxable gift. The gift tax, if any, depends upon the amount in the account. We each have 2 gift tax coupons. The annual gift tax coupon is $13,000 for each recipient and the lifetime gift tax coupon is $1 Million Dollars. Unless the bank account is very large, there shouldn’t be a gift tax. Also, in general, any gift tax owed, will be owed by the original owner. That being said, if the original owner does not pay the gift tax, the IRS does have the power to go after the new owner for the tax that is due. Finally, when the bank account changes hands and the account is in your sole name, your social security number will be noted on the bank account. At that time the interest income will be taxed to you. This Guide does not constitute legal advice and does not and is not intended to create an attorney-client relationship. The law may vary depending on the state in which you reside. It is intended only to give some direction in which to seek assistance.
Circular 230 Disclosure: Pursuant to recently-enacted U.S. Treasury Department Regulations, I am now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including attachments and enclosures, is not intended or written to be used, and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.
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