Generally

• Gifts are not considered income under federal tax law. Because a gift is not income, the gift never needs to be reported to the IRS. If you deposit the cash into a bank, your bank might have a duty to report the cash deposit to the IRS (if the deposit is large enough), but the person receiving the gift never has to report it to the IRS.
  
  

Misconceptions

• The person who gives you the cash, however, might have to pay a gift tax. People are often confused about the federal gift tax, thinking it is the person who receives the gift that must pay the tax.
  
  

Considerations

• As of 2010, gifts that are less than $13,000 do not need to be reported to the IRS. However, any gift that exceeds $13,000 must be reported to the IRS, by the person making the gift, on IRS Form 709.
  
  

Exceptions

• Some gifts never need to be reported to the IRS, even if they exceed $13,000. Those exceptions include gifts to pay tuition, gifts to pay medical expenses, gifts to your spouse, gifts to a political organization and gifts to charity. In fact, gifts to charity can actually qualify you for an income tax deduction.
  
  

Time Frame

• Even though you might have to file Form 709 with the IRS (say, for example, you give a friend a $15,000 cash gift), that doesn't necessarily mean you have to pay the gift tax. In addition to the annual gift exclusion of $13,000, there is also a lifetime exclusion for gifts. The lifetime exclusion, as of 2010, means that you can give somebody up to $1 million during your entire life, tax-free. So if you give a friend $100,000 and you have never given that friend any other money, you still won't have to pay the gift tax because your lifetime gifts to your friend are less than $1 million.