Gift in lieu of payment from client. Tax implications?

haydenj96 · #1 (**permalink**) 11-29-2015, 02:21 AM

Hi,

I do web design as a hobby. I got asked to help out with a friend's company's website and it turned into me managing it fully. I'm definitely an independent contractor, although there's no contract and I'm not paid*.

*Not on a paycheck, at least.

They said they would gift me some furniture for my new apartment as a "thank-you gift". This is the only payment I've gotten. I am totally cool with this. What I want to know is what the tax implications of this gift. It was just over $500. Pretty sure they're not going to send me a 1099. Is this a non-taxable gift, or a taxable gift that I should put on my 1040, or non-cash income that I should put on my 1040? Or is it something else?

Thanks in advance!

Wnhough · #2 (**permalink**) 11-29-2015, 09:51 AM

Quote:

Originally Posted by haydenj96

Hi,

I do web design as a hobby. I got asked to help out with a friend's company's website and it turned into me managing it fully. I'm definitely an independent contractor, although there's no contract and I'm not paid*.

*Not on a paycheck, at least.

They said they would gift me some furniture for my new apartment as a "thank-you gift". This is the only payment I've gotten. I am totally cool with this. What I want to know is what the tax implications of this gift. It was just over $500. Pretty sure they're not going to send me a 1099. Is this a non-taxable gift, or a taxable gift that I should put on my 1040, or non-cash income that I should put on my 1040? Or is it something else?

Thanks in advance!

You need to report , $500,the fmv of the gift on your return on form 1040 line 21 as other income. However, your Hobby Expenses up to Hobby Income of $500 are deducted on Sch A as Misc. Deductions Subject To 2% of your AGI. This means UNLESS yu itemize your deductions on your return, you can not claim hobby expenses on your return. Remember, your Hobby Expenses can not exceed your Hobby Income.