When do you have to file a gift tax return

If you gifted cash or other property to others in 2018, you may have a gift tax filing requirement.  Gifts may also include interest-free loans or below-fair-value sales.  The receipt of an inheritance is not considered a gift. 

How are gifts taxed to the recipient?

Gifts are not taxable income to the recipient of the gift, no matter how large the gift.  However, for appreciated property received, the tax basis in the property carries forward from the donor, so if appreciated property is received and then sold right away, a taxable gain could be triggered.    

How are gifts taxed for the donor?

For the person giving the gift, there is generally no tax due on the making of the gift unless the donor has, over time, gifted more than the “lifetime exclusion”, which is over $11 million per person in 2018.  Even though there may be no gift tax due, a gift tax return may be required to report certain gifts you are making.

Filing requirements

The purpose of filing a gift tax return is to keep a running total of gifts you have made during your lifetime, so that the IRS knows if or when you exceed your lifetime exclusion.  Generally, you must file a gift tax return for 2018 if, during the tax year, you made gifts:

• That exceeded the $15,000 per-recipient gift tax annual exclusion (other than to your U.S. citizen spouse),
• That exceeded the $152,000 annual exclusion for gifts to a non-citizen spouse,
• To a Section 529 college savings plan and wish to accelerate up to five years’ worth of annual exclusions ($75,000) into 2018, or
• Of future interests — such as remainder interests in a trust — regardless of the amount

The $15,000 annual exclusion is per recipient, and per donor.  For example, a married couple in a community property state such as Wisconsin could gift up to $60,000 to their adult daughter and her spouse ($15,000 from each parent to daughter, and $15,000 from each parent to daughter’s spouse).   Under this scenario, no gift tax return filing would be required.

Due date of the gift tax return

If you are required to file a gift tax return, the due date of the return is the same as the individual income tax filing deadline (April 15, 2019 for gifts made in 2018).  An extension is available.  If you owe gift tax, the tax is due and payable by April 15, 2019. 

Please contact Wegner CPAs if you would like more information about gift tax returns.

What Is a Gift Tax Return?

A gift tax return is a federal tax return that must be filed under certain conditions by the giver of a gift. (It is not a tax on returning gifts.) The return is known as Form 709.

Key Takeaways

• Givers of gifts worth more than $16,000 for 2022 ($17,000 for 2023) to a single recipient must fill out a "gift tax return" with their annual tax return.
• Some gifts are exempt from this rule, including gifts given to pay tuition and medical bills.
• The gifts must exceed a lifetime amount of $12.06 million to a single recipient to be taxed as of 2022 ($12.92 million in 2023 to account for inflation).

How the Gift Tax Return Works

Individuals who give a gift that exceeds the annual or lifetime exempt gift limit established by the Internal Revenue Service (IRS) must fill out the form when filing their taxes. The annual exemption limit is $16,000 per gift for 2022 ($17,000 for 2023), and the lifetime exemption in 2022 is $12.06 million ($12.92 million for 2023). The lifetime exemption is inflation-indexed, so it will rise year-over-year.

For 2022, if an individual gifts anything over the limit, even $16,001, to a single recipient, that individual must fill out a gift tax return form. The return must be filled out because gifts above the exempt amount are subject to a gift tax.

The gift tax return is only used by those who have given over $16,000 in 2022 ($17,000 in 2023). As the regulations applied to gift taxes are very complicated, it is best to consult a professional as well as your local tax law. In order to avoid the gift tax, many people use estate planning, working with a financial planner, tax professional, or attorney to strategically choose when, how, and who gets the estate owner's money.

Who Files the Gift Tax Return and Who Pays the Gift Tax?

A gift tax is a federal tax applied to an individual giving anything of value to another person. For something to be considered a gift, the receiving party cannot pay the giver full value for the gift but may pay an amount less than its full value.

A gift tax return is a form that must be filed by a gift-giver if they give any amount over the gift tax exemption. Unless special arrangements have been made, it is always the gift-giver, not the recipient, who is responsible for paying the gift tax and for filing the gift tax return.

The gift tax return is IRS Form 709. The receiver of the gift may pay the gift tax, or a percentage of it, on the giver's behalf, in the event that the giver has exceeded their lifetime gift exclusion limit.

The federal government allows married couples who file together to double the amount of their gift tax through a process called gift splitting. Married couples combine their individual allowances as if each contributed half of the amount.

For gift splitting to be official, both spouses must agree to the gift and specify the situation in which the gift was given when filing their taxes. A couple filing a gift tax return in 2022 could gift $32,000 before the giver needed to pay taxes on the amount (that amount increases to $34,000 in 2023).

Do I really need to file a gift tax return?

How much of a gift do you have to report to the IRS?

Does a gift from your parents have to be reported to the IRS as income?

How does the IRS know if you give a gift?