Gift or Income

Today TaxMama® hears from Asdfgh in the TaxQuips Forum, who tells us.  “My daughter plays piano for school choir.
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Doesn’t ask for money. She gets “thank you” from school PTO in form of flower bouquet and check for a few hundred dollars. Is that taxable income?”

     

Dear Asdfgh,

Sounds like you have a talented daughter. How delightful.

Anytime someone earns a total of $400 or more in a year, they must pay self-employment taxes on those earnings. So if your daughter earns less than that during the year – no worries.
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More than $400…?

She needs to file a Schedule C to report the income on her own tax return. If she spends any of that money on her piano-related expenses, she can deduct those costs.
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If you spend the money…perhaps she can deduct the costs – if you gift her the funds and let her pay the expenses. (for future reference.)

This is good practice for adult life, I suppose.

And remember, you can find answers to all kinds of questions about stipends and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

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