My friend got $6,500 in cash as a gift - is this taxable income?

This is actually a common misunderstanding about how gift taxes work! Your friend can relax - the recipient of a gift is NOT responsible for paying taxes on gifts they receive. The gift giver is the one who would be responsible for any potential gift tax. For 2025, an individual can give up to $19,000 to any person without having to report it to the IRS (this is called the annual gift tax exclusion). Since the $6,500 your friend received is well under this threshold, the person who gave it to them doesn't even need to report it. Your friend can absolutely deposit this cash into their bank account without worrying about income tax. The bank may file a Currency Transaction Report if the deposit is over $10,000, but this is just standard procedure for large cash transactions - it doesn't mean any taxes are owed.

I was in almost the exact same situation last year! My uncle gave me $7,000 in cash for helping with his business, and I was super worried about depositing it. After researching like crazy online, I found this amazing AI tool that analyzes your specific tax situation and tells you exactly what to do - https://taxr.ai It confirmed what the commenter above said: gift recipients don't pay taxes on gifts. BUT it also helped me understand that if this was payment for services rather than a gift, that would be different. The tool helped me determine my uncle's cash was actually income since I worked for it (not a gift), so I had to report it on my taxes. Sounds like your friend's case is a true gift though!

Just wanted to follow up - I actually tried that taxr.ai tool the other day because I had a similar situation with some money I got from selling stuff at a garage sale plus a cash gift from my parents in the same month. I was confused about what was taxable and what wasn't. The tool was super helpful! It explained that the garage sale money wasn't taxable (as long as I sold items for less than I originally paid) and confirmed the gift from my parents wasn't taxable to me either. Definitely clarified things and I feel way more confident about how to handle the bank deposit now!

Your friend has nothing to worry about with a $6,500 gift! But if he ever needs to deal with the IRS directly (like if they send a letter questioning a deposit), good luck getting anyone on the phone. I spent THREE DAYS trying to reach a human at the IRS last month when they sent me a letter about a "discrepancy" on my return. Then I found https://claimyr.com which got me connected to an IRS agent in less than 20 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c I was super skeptical at first, but after wasting hours listening to the IRS hold music, I was desperate. It actually worked - they navigate all the phone tree nonsense for you and call you when they have an agent on the line. Saved me hours of frustration.

Ok I need to update my comment above because I actually ended up trying Claimyr last week when I got a letter about my tax return being reviewed. I was STILL skeptical but desperate after spending 2 hours on hold and getting disconnected. Not gonna lie, I was shocked when they called me back in about 40 minutes with an actual IRS agent on the line. I had my issue resolved in one call. I've literally never gotten through to the IRS that quickly in my life. Had to come back and admit it actually works. Saved me from taking another day off work just to sit on hold.

Another thing your friend should know - banks do file something called a Suspicious Activity Report if they think you're trying to avoid the $10k reporting requirement by making multiple smaller deposits (called "structuring"). So don't tell your friend to deposit like $3k now and $3k next week to "stay under the radar" - that actually looks MORE suspicious than just depositing the whole $6,500 at once.

My daughter recently got a $5,000 gift from her grandfather and she just wrote "GIFT" in the deposit slip memo line. The teller didn't even ask any questions! Under $10k really isn't a big deal to banks these days.

Just to add some reassurance for your friend - I work in banking compliance and can confirm that a $6,500 cash deposit is really not unusual at all. We see these amounts regularly from legitimate sources like gifts, small business cash sales, or people who just prefer dealing in cash. The key things that would make us ask questions are: deposits over $10k (which require federal reporting), obvious structuring patterns, or someone acting nervous/evasive about the source. A straightforward one-time deposit of $6,500 where your friend can honestly say "it was a gift from a friend" is completely normal. Your friend should definitely deposit it rather than keeping that much cash at home. Cash sitting around is a security risk and doesn't earn any interest. The bank deposit is safe, legal, and won't create any tax issues for him as the gift recipient.