A gift tax return refers to a federal tax return that must be filed under certain conditions by the giver of a gift. Form 709 is the official documentation for this purpose.
Key Takeaways
- Givers of gifts exceeding $16,000 for 2022 ($17,000 for 2023) to a single recipient must fill out a gift tax return with their annual tax return.
- Gifts such as payments for tuition and medical bills are exempt from this requirement.
- For taxation, gifts to a single recipient must surpass a lifetime amount of $12.06 million in 2022 ($12.92 million in 2023).
How the Gift Tax Return Works
Individuals who give a gift surpassing the annual or lifetime exemption limits set by the Internal Revenue Service (IRS) must fill out Form 709 when filing their taxes. These limits are:
- Annual exemption limit: $16,000 per gift in 2022 ($17,000 in 2023).
- Lifetime exemption: $12.06 million in 2022 ($12.92 million for 2023).
For example, in 2022, if someone gifts more than $16,000—even $16,001—to a single recipient, they must file a gift tax return because gifts above these limits are subject to taxation.
It’s important to consult a professional, such as a financial planner, tax professional, or attorney, and consider your local tax law when navigating gift taxes. Effective estate planning and understanding exemptions can help avoid unnecessary gift taxes.
Who Files the Gift Tax Return and Who Pays the Gift Tax?
Gift tax is a federal tax on any individual giving something of value to another person without receiving full value in return. The responsibility to file a gift tax return lies with the gift-giver if the amount gifted exceeds the exemption limits.
The gift tax return is IRS Form 709. In some scenarios, the recipient may cover the tax or its portion on the giver’s behalf if the gift exceeds the lifetime exclusion limit.
Married couples who file together can employ a process known as gift splitting to double the exemption amount. This means a couple can gift up to $32,000 before incurring a tax liability in 2022 (rising to $34,000 in 2023), provided both spouses agree and the condition is specified in their tax filing.
Related Terms: Estate Planning, Form 709, Gift Splitting, Tax Exemption, Federal Tax Return.
References
- Internal Revenue Service. “IRS provides tax inflation adjustments for tax year 2023”.
- Internal Revenue Service. “Frequently Asked Questions on Gift Taxes”.
- Internal Revenue Service. “Estate Tax”.
