Tax Implications of Gift Money: Do I Have to Pay Taxes on Money Received as a Gift?

Do I Have to Pay Taxes on Gifted Money?

Would it be spontaneous to answer no to this question, but are we really sure it is so? Often we tend to think that a gift and a donation are not the same thing; however, there is no difference between a cash gift and a donation: from a legal point of view, these terms have the same meaning.

This raises many doubts, considering that a tax is due for donations.

Are Taxes Paid on Cash Gifts?

Let’s start with the premise that gifts do not contribute to taxable income, and therefore, no Personal Income Tax (IRPEF) must be paid on them.
Gifts received, both in cash and via checks or bank transfers, do not need to be included in the income tax return.
It seems quite obvious that a grandmother who gives money to her grandson does not need to make a donation act; it is a gift of small value and does not require a public deed.

However, if the gift has a significant value, a public deed and a notary are required for the donation, and in this case, the gift tax comes into play.

Are There Limits to the Amount of Money That Can Be Gifted?

Obviously, the law cannot set any limits on the money that can be gifted, but there are formal and substantial limits to avoid paying taxes on sums.
The formal limits concern how the gift occurs and whether or not it requires the presence of a notary and those related to the use of cash: if the gift exceeds €4,999, it must be made through traceable payment methods.

Substantial limits, instead, concern the amount and aim to protect forced heirs if the gift is of substantial value: the donation cannot deprive the heirs of a minimum share of the donor’s estate.

No Taxes on Small-Value Gifts

If you decide to make a cash gift of small value (for which there is no limit set by law), the presence of a notary and the need for a public deed are not necessary.
The gift of small value does not have to be necessarily between relatives; it can also occur among friends as long as it does not impoverish the donor and enrich the recipient.

In short, the amount that falls within the small value depends on the economic conditions of both the donor and the recipient.

When Do You Pay Taxes on Cash Gifts?

As we have seen, theoretically, no taxes are due on cash gifts, excluding the gift tax (but only in cases where it applies).
The gift tax, in fact, only applies to high amounts: for example, between parents and children, it is due only for the part of the gift exceeding one million euros, while for siblings and relatives up to the third degree, it is due only on the amount exceeding 100,000 euros.

Which Declaration Do Cash Gifts Fall Under?

As already mentioned, cash gifts received, whether in cash, by check, or bank transfer, do not fall under the income tax return.
However, if these amounts remain in the current account or savings account, they can affect the Indicator of Economic Situation (ISEE) (two years after they were received) because the ISEE also considers the average balances of bank accounts (current accounts and savings accounts).