Do you have to pay taxes on sugar baby money? If you are a U.S. citizen, then the answer would depend on whether you give the money for sugar baby's "services" or whether the money is a "gift" from a sugar daddy.
If a sugar daddy pays for sugar baby "services", then the money is taxable income (albeit potentially illegal) and subject to tax in the US.
If, on the other hand, if a sugar daddy gives sugar baby the allowance out of love and affection and without any expectation for consideration or quid pro quo, then it may be a "gift" and not subject to tax in the US.
A sugar-daddy-sugar-baby relationship could somehow be construed as not exchanging fees/income for services). Gift taxes in the US are owed by the gifter the sugar daddy not the giftee the sugar baby. The IRS says that sugar daddies need to report any gifts in excess of $15,000 per year.
Interestingly, tuition payments and medical expenses (such as sugar daddy-funded breast implants!) do not need to be reported. Also, gifts only need to be reported when they exceed $15,000 in a year per person, not in aggregate.
However, these gifts are not directly taxed. Instead, they reduce the sugar daddy's lifetime exemption from the estate tax, which is currently $11.58 million.
So, an sugar daddy who gave his sugar baby $20k over the course of a year and reported the gift in his tax return would have his estate tax exemption reduced to $11.56 million. This likely impacts very few sugar daddies.
In reality, very few sugar daddies report their sugar payments as gifts, and there are no news reports of an sugar daddy being audited or otherwise getting in trouble for not reporting sugar payments.
For sugar babies, the answer is much more straightforward: as long as the sugar has been provided in the context of a relationship, and not as a fee for service, there are no taxes owed, and no reporting is necessary.
Use Cash
If a sugar daddy using cash to pay for the allowance and shopping, that isn’t traceable. As a sugar daddy, you can keep a bunch of cash in a safe and use that, but deposit small amounts into a bank for things that require a credit card.
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