Are Cash Gifts Taxable? What You Should Know Before Filing with the IRS

mariadrg2021
Jul 12
2 min read

Updated: Jul 14

At MDR Tax Filing, we often receive questions about cash gifts—especially during tax season. Many wonder: “Do I need to report cash gifts I received as income on my tax return?” Here’s what you need to know:

✅ Cash Gifts Are Not Considered Taxable Income

If someone gives you money as a gift, you do not report it as income on your tax return. Cash gifts are not considered taxable income by the IRS for the person receiving them. Instead, the responsibility falls on the person giving the gift.

The donor (the person giving the money) is required to report large gifts by filing IRS Form 709 — United States Gift Tax Return. This applies only if the gift exceeds the annual gift tax exclusion limits set by the IRS.

💡 What Records Should You Keep?

While recipients don't pay taxes on gifts, it’s important to keep proof that the money was indeed a gift. Recommended documentation includes:

A written letter or note from the donor stating that the transfer is a gift.
Bank records or transaction notes labeled as “Gift.”

This documentation helps in case the IRS ever questions large deposits or account movements.

🌎 Special Note About Foreign Gifts

If you receive cash gifts from someone outside the United States (such as family members living abroad) totaling over $100,000 in one year, you must report it using Form 3520.

Important:You are only required to report it—you do not pay taxes on these foreign gifts. The form simply informs the IRS about large transfers from foreign sources.

✅ In Summary:

Cash gifts are not taxable for the person receiving them.
The person giving the gift may need to report it using Form 709.
Keep clear documentation to show the money was a gift.
Report foreign gifts over $100,000 using Form 3520 (no tax owed, but reporting is required).