Gift Tax Return
Candlefocus EditorThe gift tax return is a form required when giving money or property worth more than $16,000 to a single recipient beginning in 2022 ($17,000 in 2023). This amount is adjusted annually for inflation. The recipient of the gift will not be taxed – it is the gift giver who must pay any applicable taxes.
The gift giver is responsible for meeting the annual exclusion limit (AEL). The AEL is the amount an individual can gift in a year before taxes are owed. For 2021, the AEL is $15,000. As of 2022, this has increased to $16,000 ($17,000 as of 2023). Unused portions of the AEL can be carried over to future tax years, so long as the total of the amount gifted in 2021 and previous years does not exceed the lifetime exemption limit.
The lifetime exemption limit is the maximum amount one person can give during their lifetime without paying the federal gift tax. This amount is adjusted for inflation each year. As of 2021, the exemption is set at $11.7 million.
The gift tax return form is Forms 709, United States Gift Tax Return. The instructions on the form provide information on how to complete the form, including determining the taxable amount and how to calculate the gift tax liability, if any.
It is important to note that certain gifts are exempt from the gift tax, including gifts to charitable organizations, political organizations and gifts given to pay tuition or medical bills. Also, any transfers of funds between spouses or between domestic partners are also exempt from the gift tax.
By understanding gift tax laws, you can give in confidence knowing that you are meeting the legal requirements and filing correctly on the gift tax return.
The gift tax return must be filed before you file your annual income tax return. If taxes are owed on the gift, you will need to pay them when you file the return. The filing deadline for the gift tax return is April 15th of the year after the gift was made. For example, if you give a gift in 2021, you will need to file the gift tax return by April 15th, 2022.
If you’ve made a large financial gift to someone that exceeds the AEL, it is important to be aware of the rules and to file the gift tax return correctly. If you have any questions or need assistance, consult with a tax expert to ensure compliance.