Larry, I'm planning to purchase an engagement ring for my fiancee. Will it be subject to any tax? Robert
Robert, Congratulations on your engagement! To answer your question, you can give gifts worth up to $12,000 to any individual annually - and not owe gift tax. And, if you marry in the year that you give the ring, it's also OK, because spouses' gifts to each other are tax free, and marital status at year-end governs for the full year for tax purposes.
If the ring is worth more that $12,000 and you don't marry in the year that you give it, state law determines whether it is a gift. In some states, an engagement ring is considered a conditional gift that must be returned if no wedding takes place, so no federal gift tax applies. But in a state where the gift of the ring is considered a completed gift that the recipient is entitled to keep even if there is no marriage, gift tax applies.
Good luck with your future plans!
Larry Kopsa CPA
