NO Gift Tax on Gifts >$15k in a Year

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willthrill81
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NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

I don't know why, but gift taxes seem to be one of the most misunderstood topics in the tax code.

The quote below neatly sums up the issue. You do NOT have to pay taxes on gifts larger than $15k per year per recipient; the amount over $15k merely counts against your $11.4 million (as of 2019; the amount is adjusted for inflation) lifetime exemption. And your spouse has their own $15k annual gift tax exclusion.
If you gift $120,000 to your daughter in 2019, $105,000 of the gift is taxable because it exceeds the $15,000 annual exclusion by that amount. You can either pay the gift tax in that year, or you can charge it to your lifetime exemption. If you do the latter, your $105,000 taxable amount reduces your 2019 lifetime exemption from $11.4 million to $11,295,000.
https://www.thebalance.com/gift-tax-exc ... on-3505656

Gifts greater than $15k to a single donor must be reported using IRS Form 709 so they can track how much of your lifetime exemption you've used up.

So unless you're planning on giving and/or leaving behind an estate with a combined total exceeding $11.4 million, and double that if you're married, you don't have to pay the gift tax. You merely report gifts over $15k (or $30k if you're married).

I hope that this will clarify the issue for someone.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by Gill »

You’re right. I’m always amazed at all the worry about the gift tax. Many seem to fear that receipt of a gift might also constitute taxable income. Much of this may come from the days when the annual exclusion was $3,000 and the lifetime exemption was $30,000.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by H-Town »

Filing tax return alone already scares people. Now that they'll have to file Form 709 that they haven't seen before, that will deter people from giving more than 15k gifts to a single recipient.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by abuss368 »

You are correct. Form 709 is not difficult.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by retiringwhen »

abuss368 wrote: Sun Feb 17, 2019 8:40 pm You are correct. Form 709 is not difficult.
But it is annoying. I will take it over the NIIT form any day - Form 8960.... that one hurts my head.....
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by aspiringboglehead »

The lifetime exemption is currently scheduled to fall as a matter of law to a level that many people in this forum will hit, or at least may hit. (It is of course also subject to change by legislation.) Therefore, it's not a waste of time to try to figure out ways to structure a gift so that it falls within the annual exclusion if you can.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by Jack FFR1846 »

And don't forget that State lifetime exclusions may be much lower. My state, it's $1M.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by EddyB »

abuss368 wrote: Sun Feb 17, 2019 8:40 pm You are correct. Form 709 is not difficult.
Although you may be dead by the time anyone determines that it wasn’t completed correctly.
Last edited by EddyB on Sun Feb 17, 2019 9:30 pm, edited 1 time in total.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

Jack FFR1846 wrote: Sun Feb 17, 2019 8:57 pm And don't forget that State lifetime exclusions may be much lower. My state, it's $1M.
I believe that Connecticut is the only state that still has a gift tax. Fifteen states have estate taxes though. In my own state, Washington, you can gift as much as you want before your death, so it's pretty easy to avoid the estate tax here at least.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by TravelGeek »

willthrill81 wrote: Sun Feb 17, 2019 9:17 pm In my own state, Washington, you can gift as much as you want before your death, so it's pretty easy to avoid the estate tax here at least.
So people in Washington state generally know ahead of time when they are going to die? ;)
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

TravelGeek wrote: Sun Feb 17, 2019 9:27 pm
willthrill81 wrote: Sun Feb 17, 2019 9:17 pm In my own state, Washington, you can gift as much as you want before your death, so it's pretty easy to avoid the estate tax here at least.
So people in Washington state generally know ahead of time when they are going to die? ;)
Yes, of course. :wink:

You can gift any funds that would exceed the $4 million+ threshold for married spouses to a trust, family members, charities, etc. well before your passing.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by bottlecap »

To be fair, it was only recently raised to $11 million, and will return to $5 million in 2025. So time your death accordingly, if it matters to you.

While the form is simple, not paying taxes and monkeying with lesser-known provisions of the Code scares people. I "get" this. The government is scary. It has auditors, guns, courts, and prisons - and is seldom afraid to use them.

So most people just respect the limit and don't want to bother with it.

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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

aspiringboglehead wrote: Sun Feb 17, 2019 8:47 pm The lifetime exemption is currently scheduled to fall as a matter of law to a level that many people in this forum will hit, or at least may hit. (It is of course also subject to change by legislation.) Therefore, it's not a waste of time to try to figure out ways to structure a gift so that it falls within the annual exclusion if you can.
In 2017, the lifetime exemption was $5.5 million. That would certainly impact some people here, but certainly not the majority. For those that it might and who are concerned about the lifetime exemption being reduced in the future, it might be worthwhile to stay under the annual exclusion. Practically, though, that could be very difficult unless you have a lot of people to give to.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by hlinee »

Wow I am glad I came across this thread because I was totally under the belief that you were taxed on the excess of $15,000/yr limit. Thanks for posting this thread!
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by HueyLD »

I would like to thank Will for starting this thread.

If I could earn a dime ever time someone asked about gift tax, I would be a very wealthy person.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by HueyLD »

abuss368 wrote: Sun Feb 17, 2019 8:40 pm You are correct. Form 709 is not difficult.
Well, rebuilding my car's engine is not difficult for a mechanic, but it may be difficult for most people.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by cas »

EddyB wrote: Sun Feb 17, 2019 9:15 pm
abuss368 wrote: Sun Feb 17, 2019 8:40 pm You are correct. Form 709 is not difficult.
Although you may be dead by the time anyone determines that it wasn’t completed correctly.
IANAL, plus I have not yet been responsible for filing a Form 706 (Estate Tax Return). But, as far as my ignorant self can figure out, there is another way your past large gifts can cause an unintended headache upon your demise:

You need to store all past Form 709s, perhaps for decades, someplace that your personal representative will be sure to find them, in a format that won't have aged out of existence over time.

From the instructions for the Estate Tax Return:
Line 4 Worksheet and the Line 7 Worksheet.

You must have all of the decedent's gift tax returns (Forms 709) before completing Worksheet TG—Taxable
Gifts Reconciliation. [ . . . ] In addition, you must make a reasonable effort to discover any gifts in excess of the annual exclusion made by the decedent (or on behalf of the decedent under a power of attorney) for which no Forms 709 were filed.
And, as far as my ignorant self can figure out, more personal representatives than you might think may find themselves filing an Estate Tax Return (even if your estate is under the estate tax exemption): an Estate Tax Return must be filed to take advantage of portability (letting your spouse "inherit" the unused amount in your estate tax exemption).
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by SGM »

My state has been raising its estate tax limit and eventually it is supposed to go as high as the federal limit. There is an additional tax on gifts to those who are not direct descendants. Many multi-millionaires were moving out of state prior to the state estate tax exemption.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

cas wrote: Mon Feb 18, 2019 8:30 amYou need to store all past Form 709s, perhaps for decades, someplace that your personal representative will be sure to find them, in a format that won't have aged out of existence over time.
That's good advice. They should probably be stored in multiple formats as well (e.g. paper, PDF).
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by MathIsMyWayr »

cas wrote: Mon Feb 18, 2019 8:30 am ... another way your past large gifts can cause an unintended headache upon your demise:

You need to store all past Form 709s, perhaps for decades, someplace that your personal representative will be sure to find them, in a format that won't have aged out of existence over time.

From the instructions for the Estate Tax Return:
Line 4 Worksheet and the Line 7 Worksheet.

You must have all of the decedent's gift tax returns (Forms 709) before completing Worksheet TG—Taxable
Gifts Reconciliation. [ . . . ] In addition, you must make a reasonable effort to discover any gifts in excess of the annual exclusion made by the decedent (or on behalf of the decedent under a power of attorney) for which no Forms 709 were filed.
And, as far as my ignorant self can figure out, more personal representatives than you might think may find themselves filing an Estate Tax Return (even if your estate is under the estate tax exemption): an Estate Tax Return must be filed to take advantage of portability (letting your spouse "inherit" the unused amount in your estate tax exemption).
Sounds like a requirement of meticulous record keeping. Staying below the annual exempt limit has value.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

MathIsMyWayr wrote: Mon Feb 18, 2019 11:35 am
cas wrote: Mon Feb 18, 2019 8:30 am ... another way your past large gifts can cause an unintended headache upon your demise:

You need to store all past Form 709s, perhaps for decades, someplace that your personal representative will be sure to find them, in a format that won't have aged out of existence over time.

From the instructions for the Estate Tax Return:
Line 4 Worksheet and the Line 7 Worksheet.

You must have all of the decedent's gift tax returns (Forms 709) before completing Worksheet TG—Taxable
Gifts Reconciliation. [ . . . ] In addition, you must make a reasonable effort to discover any gifts in excess of the annual exclusion made by the decedent (or on behalf of the decedent under a power of attorney) for which no Forms 709 were filed.
And, as far as my ignorant self can figure out, more personal representatives than you might think may find themselves filing an Estate Tax Return (even if your estate is under the estate tax exemption): an Estate Tax Return must be filed to take advantage of portability (letting your spouse "inherit" the unused amount in your estate tax exemption).
Sounds like a requirement of meticulous record keeping. Staying below the annual exempt limit has value.
Certainly it does, but if someone wants to make a significant contribution to a family member or a trust, for instance, in one year, they only need to keep records and file Form 709 for that single year. That's not an onerous requirement.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

There have been recent inquiries in other threads about the gift tax, so I'm bumping this thread.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by hicabob »

"Form 709" seems like the type of form many people might not file even though they should. What would be the consequences of such miscreancy?
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

hicabob wrote: Sat Mar 02, 2019 7:04 pm "Form 709" seems like the type of form many people might not file even though they should. What would be the consequences of such miscreancy?
If the oversight was unintentional, nothing unless the IRS did a full audit.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by deltaneutral83 »

willthrill81 wrote: Sun Feb 17, 2019 9:40 pm
TravelGeek wrote: Sun Feb 17, 2019 9:27 pm
willthrill81 wrote: Sun Feb 17, 2019 9:17 pm In my own state, Washington, you can gift as much as you want before your death, so it's pretty easy to avoid the estate tax here at least.
So people in Washington state generally know ahead of time when they are going to die? ;)
Yes, of course. :wink:

You can gift any funds that would exceed the $4 million+ threshold for married spouses to a trust, family members, charities, etc. well before your passing.
gift before death, lose step up in cost basis.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by Broken Man 1999 »

willthrill81 wrote: Sun Feb 17, 2019 10:24 pm
aspiringboglehead wrote: Sun Feb 17, 2019 8:47 pm The lifetime exemption is currently scheduled to fall as a matter of law to a level that many people in this forum will hit, or at least may hit. (It is of course also subject to change by legislation.) Therefore, it's not a waste of time to try to figure out ways to structure a gift so that it falls within the annual exclusion if you can.
In 2017, the lifetime exemption was $5.5 million. That would certainly impact some people here, but certainly not the majority. For those that it might and who are concerned about the lifetime exemption being reduced in the future, it might be worthwhile to stay under the annual exclusion. Practically, though, that could be very difficult unless you have a lot of people to give to.
Is the $5 mil per individual, and doubled to $10 mil for a couple if/when current level ages out?

Not that I'm likely to be constrained in any way!

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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

Broken Man 1999 wrote: Sat Mar 02, 2019 7:23 pm
willthrill81 wrote: Sun Feb 17, 2019 10:24 pm
aspiringboglehead wrote: Sun Feb 17, 2019 8:47 pm The lifetime exemption is currently scheduled to fall as a matter of law to a level that many people in this forum will hit, or at least may hit. (It is of course also subject to change by legislation.) Therefore, it's not a waste of time to try to figure out ways to structure a gift so that it falls within the annual exclusion if you can.
In 2017, the lifetime exemption was $5.5 million. That would certainly impact some people here, but certainly not the majority. For those that it might and who are concerned about the lifetime exemption being reduced in the future, it might be worthwhile to stay under the annual exclusion. Practically, though, that could be very difficult unless you have a lot of people to give to.
Is the $5.5 mil per individual, and doubled to $11 mil for a couple?

Not that I'm likely to be constrained in any way!

Broken Man 1999
The current exemption is $11.4 million per person, so double that for a couple.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by 4ransom »

Does the person who received the gift required to pay regular income tax on it?
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by Teague »

4ransom wrote: Sat Mar 02, 2019 7:43 pm Does the person who received the gift required to pay regular income tax on it?
No, no income tax on that money for the recipient.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by Gill »

4ransom wrote: Sat Mar 02, 2019 7:43 pm Does the person who received the gift required to pay regular income tax on it?
Receipt of a gift is not income.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

deltaneutral83 wrote: Sat Mar 02, 2019 7:17 pm
willthrill81 wrote: Sun Feb 17, 2019 9:40 pm
TravelGeek wrote: Sun Feb 17, 2019 9:27 pm
willthrill81 wrote: Sun Feb 17, 2019 9:17 pm In my own state, Washington, you can gift as much as you want before your death, so it's pretty easy to avoid the estate tax here at least.
So people in Washington state generally know ahead of time when they are going to die? ;)
Yes, of course. :wink:

You can gift any funds that would exceed the $4 million+ threshold for married spouses to a trust, family members, charities, etc. well before your passing.
gift before death, lose step up in cost basis.
Right, but that still might be preferable to paying a state like Washington's estate taxes. And the person you're giving it to could easily pay a LTCG rate of 0% when they sell it.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by kaneohe »

Sch B asks for a list of prior gifts. I had assumed that that accumulation would have been enough so that only the most recent 709 would be needed in the future. What value/info is retained in the even older 709s?
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by Wricha »

Lets say you gifted someone $5M in 2019 leaving you 6M for distribution tax free. What happens in 2025 if it goes back to $5M have you used up gift exemption?
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

Wricha wrote: Sat Mar 02, 2019 8:45 pm Lets say you gifted someone $5M in 2019 leaving you 6M for distribution tax free. What happens in 2025 if it goes back to $5M have you used up gift exemption?
I believe that yes, you would have used it up.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by LadyGeek »

We have a new wiki page. See: Gift tax

Please review.

Comments / questions / corrections are welcome. Wiki editors should edit the page directly.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by Wricha »

willthrill81 wrote: Sat Mar 02, 2019 9:29 pm
Wricha wrote: Sat Mar 02, 2019 8:45 pm Lets say you gifted someone $5M in 2019 leaving you 6M for distribution tax free. What happens in 2025 if it goes back to $5M have you used up gift exemption?
I believe that yes, you would have used it up.
Thanks, willtrill. Had you gifted $10M in 2019 and in 2025 it goes back to $5M ? would the government have the right to clawback that deduction?
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

Wricha wrote: Sat Mar 02, 2019 9:48 pm
willthrill81 wrote: Sat Mar 02, 2019 9:29 pm
Wricha wrote: Sat Mar 02, 2019 8:45 pm Lets say you gifted someone $5M in 2019 leaving you 6M for distribution tax free. What happens in 2025 if it goes back to $5M have you used up gift exemption?
I believe that yes, you would have used it up.
Thanks, willtrill. Had you gifted $10M in 2019 and in 2025 it goes back to $5M ? would the government have the right to clawback that deduction?
There is Constitutional provision for the Congress to do what they wish with taxes.
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Re: NO Gift Tax on Gifts >$15k in a Year

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Re: NO Gift Tax on Gifts >$15k in a Year

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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

LadyGeek wrote: Sat Mar 02, 2019 10:06 pm ^^^ See: Treasury, IRS: Making large gifts now won’t harm estates after 2025 (IR-2018-229, November 20, 2018)
I believe that that is merely a proposition and not regulation in force.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by LadyGeek »

^^^ I stand corrected. However, it is a proposed regulation published for public comments and can be discussed in this forum.

See: Federal Register :: Estate and Gift Taxes; Difference in the Basic Exclusion Amount
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by Spirit Rider »

Wricha wrote: Sat Mar 02, 2019 9:48 pm
willthrill81 wrote: Sat Mar 02, 2019 9:29 pm
Wricha wrote: Sat Mar 02, 2019 8:45 pm Lets say you gifted someone $5M in 2019 leaving you 6M for distribution tax free. What happens in 2025 if it goes back to $5M have you used up gift exemption?
I believe that yes, you would have used it up. Correct
Thanks, willtrill. Had you gifted $10M in 2019 and in 2025 it goes back to $5M ? would the government have the right to clawback that deduction? No
LadyGeek provided a link to a notice of proposed rulemaking REG-106706-18 which was published in the Federal Register on 11/23/18 and went into effect on 2/21/19 after 90 days. It is still subject to a public hearing this month and revision before final regulations are issued.

Basically, you get to take the greater of any lifetime exclusion taken before any decrease or the lifetime exclusion in effect after any decrease. This is very unlikely to change in any revision.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by White Coat Investor »

willthrill81 wrote: Sat Mar 02, 2019 7:05 pm
hicabob wrote: Sat Mar 02, 2019 7:04 pm "Form 709" seems like the type of form many people might not file even though they should. What would be the consequences of such miscreancy?
If the oversight was unintentional, nothing unless the IRS did a full audit.
Audit of what, your check register? Like much of the tax code, this seems to be pretty much on the honor system.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by WannabeAgAlum »

White Coat Investor wrote: Sun Mar 03, 2019 1:22 am
willthrill81 wrote: Sat Mar 02, 2019 7:05 pm
hicabob wrote: Sat Mar 02, 2019 7:04 pm "Form 709" seems like the type of form many people might not file even though they should. What would be the consequences of such miscreancy?
If the oversight was unintentional, nothing unless the IRS did a full audit.
Audit of what, your check register? Like much of the tax code, this seems to be pretty much on the honor system.
It could become a big issue at your death. Audit of estate tax return and audit of lifetime gifts for which statute of limitations has not run. For folks under the exemption amount, no harm no foul.

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Re: NO Gift Tax on Gifts >$15k in a Year

Post by WannabeAgAlum »

willthrill81 wrote: Sun Feb 17, 2019 7:52 pm I don't know why, but gift taxes seem to be one of the most misunderstood topics in the tax code.

The quote below neatly sums up the issue. You do NOT have to pay taxes on gifts larger than $15k per year per recipient; the amount over $15k merely counts against your $11.4 million (as of 2019; the amount is adjusted for inflation) lifetime exemption. And your spouse has their own $15k annual gift tax exclusion.
If you gift $120,000 to your daughter in 2019, $105,000 of the gift is taxable because it exceeds the $15,000 annual exclusion by that amount. You can either pay the gift tax in that year, or you can charge it to your lifetime exemption. If you do the latter, your $105,000 taxable amount reduces your 2019 lifetime exemption from $11.4 million to $11,295,000.
https://www.thebalance.com/gift-tax-exc ... on-3505656

Gifts greater than $15k to a single donor must be reported using IRS Form 709 so they can track how much of your lifetime exemption you've used up.

So unless you're planning on giving and/or leaving behind an estate with a combined total exceeding $11.4 million, and double that if you're married, you don't have to pay the gift tax. You merely report gifts over $15k (or $30k if you're married).

I hope that this will clarify the issue for someone.
I think much of the confusion stems from the language used on the IRS forms, which comes from the tax code. In the quote you posted, the author got one thing wrong in my opinion; I don't think there is an option to pay the gift tax (though I imagine the IRS would take it if you tried to pay). I think the donor must apply the taxable gift to his/her available exemption.

Other than that, the quote is using language straight from the tax code. The $105,000 in the author's example is considered a "taxable gift" based on the code and on Form 709. That doesn't mean you pay tax on that amount, which is the point of your post and which I agree with (unless of course you've already used up your available exemption).

So, I blame Congress. And I blame the author for saying it is optional to pay gift tax if there is exemption available, and for failing to clarify that "taxable gifts" does not mean any tax is paid (for most people).

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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

WannabeAgAlum wrote: Sun Mar 03, 2019 3:32 am
White Coat Investor wrote: Sun Mar 03, 2019 1:22 am
willthrill81 wrote: Sat Mar 02, 2019 7:05 pm
hicabob wrote: Sat Mar 02, 2019 7:04 pm "Form 709" seems like the type of form many people might not file even though they should. What would be the consequences of such miscreancy?
If the oversight was unintentional, nothing unless the IRS did a full audit.
Audit of what, your check register? Like much of the tax code, this seems to be pretty much on the honor system.
It could become a big issue at your death. Audit of estate tax return and audit of lifetime gifts for which statute of limitations has not run. For folks under the exemption amount, no harm no foul.

Wannabe
Jim's point is valid though. Unless the IRS verifies who you've sent funds to and whether those funds were for goods/services rendered or gifts, nothing will come of the whole thing. It's a lot more involved than an audit of a tax return.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by maxq »

I've been following this topic with interest. I have a question as to how the reporting is actually done. For example, if a person gifts someone $15K or more during 2019, I understand the form would be due to the IRS by Apr 15 of the year after the gift is made, but am unsure of how it is actually filed: Via mailing it in sometime before Apr 15 2020 as a standalone submission with no reference to the 2019 tax year 1040? Attach it to the tax year 2019 tax year 1040 next year? I noticed the Form 709 is not in the H&R Block Deluxe program, so I'm not sure it could be part of the normal e-filing.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by willthrill81 »

maxq wrote: Sun Mar 03, 2019 7:39 pm I've been following this topic with interest. I have a question as to how the reporting is actually done. For example, if a person gifts someone $15K or more during 2019, I understand the form would be due to the IRS by Apr 15 of the year after the gift is made, but am unsure of how it is actually filed: Via mailing it in sometime before Apr 15 2020 as a standalone submission with no reference to the 2019 tax year 1040? Attach it to the tax year 2019 tax year 1040 next year? I noticed the Form 709 is not in the H&R Block Deluxe program, so I'm not sure it could be part of the normal e-filing.
Only gifts over $15k in a calendar year require Form 709.

From the IRS instructions for Form 709:
1. Determine whether you are
required to file Form 709.
2. Determine what gifts you must
report.
3. Decide whether you and your
spouse, if any, will elect to split gifts for the
year.
4. Complete lines 1 through 19 of Part
1—General Information.
5. List each gift on Part 1, 2, or 3 of
Schedule A, as appropriate.
6. Complete Schedules B, C, and D,
as applicable.
7. If the gift was listed on Part 2 or 3 of
Schedule A, complete the necessary
portions of Schedule D.
8. Complete Schedule A, Part 4.
9. Complete Part 2—Tax
Computation.
10. Sign and date the return.
And the instructions also clarify that Form 709 is a return.
Form 709 is an annual return.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by LadyGeek »

Stated earlier, I didn't want to lose this in the discussion. Is the new wiki page OK?
LadyGeek wrote: Sat Mar 02, 2019 9:37 pm We have a new wiki page. See: Gift tax

Please review.

Comments / questions / corrections are welcome. Wiki editors should edit the page directly.
I just added a statement that tax returns aren't needed unless the gift exceeds the exclusion amount.
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Re: NO Gift Tax on Gifts >$15k in a Year

Post by WannabeAgAlum »

willthrill81 wrote: Sun Mar 03, 2019 6:53 pm
WannabeAgAlum wrote: Sun Mar 03, 2019 3:32 am
White Coat Investor wrote: Sun Mar 03, 2019 1:22 am
willthrill81 wrote: Sat Mar 02, 2019 7:05 pm
hicabob wrote: Sat Mar 02, 2019 7:04 pm "Form 709" seems like the type of form many people might not file even though they should. What would be the consequences of such miscreancy?
If the oversight was unintentional, nothing unless the IRS did a full audit.
Audit of what, your check register? Like much of the tax code, this seems to be pretty much on the honor system.
It could become a big issue at your death. Audit of estate tax return and audit of lifetime gifts for which statute of limitations has not run. For folks under the exemption amount, no harm no foul.

Wannabe
Jim's point is valid though. Unless the IRS verifies who you've sent funds to and whether those funds were for goods/services rendered or gifts, nothing will come of the whole thing. It's a lot more involved than an audit of a tax return.
Yes, lots of self reporting. IRS has chance to verify during an audit. If someone fails to report a "taxable gift" during their life and then dies with an estate that requires an estate tax return to be filed, this could be a big issue. A common example is a child who was given shares of the family business during life, then helps with mom's/dad's estate. They better be careful about signing a 706 that doesn't show the lifetime gift. And even when they do, there are valuation issues that can cause headaches and much more tax at death than if the gift had been reported on time and with proper valuation. Not an issue for most folks, based on current law.
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