Gift tax

🇺🇸

The  is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.

The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

What can be excluded from gifts?
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.


 * 1) Gifts that are not more than the annual exclusion for the calendar year.
 * 2) Tuition or medical expenses you pay for someone (the educational and medical exclusions).
 * 3) Gifts to a US citizen spouse.
 * 4) Gifts to a political organization for its use.

In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.

Annual exclusion
As noted in the previous section, gifts under the annual exclusion amount are not a taxable gift. The exclusion amount is $16,000 in 2022, $17,000 in 2023.

Married couples are each entitled to give away the annual exclusion amount on the gift. In 2023, the total for you and your spouse is $34,000.

The lifetime gift tax exemption is the total amount you can give away tax-free over the course of your entire lifetime. It's a collective cap rather than by person or by year, and it's in addition to the annual exclusion.

Present interest
Gifts under the annual exclusion must be in the form of present interest. A gift is considered a present interest if the donee has all immediate rights to the use, possession, and enjoyment of the property or income from the property.

A gift of a future interest cannot be excluded under the annual exclusion. A gift is considered a future interest if the donee's rights to the use, possession, and enjoyment of the property or income from the property will not begin until some future date. Future interests include reversions, remainders, and other similar interests or estates.

Tax return filing
The donor is responsible for paying the gift tax. However, if the donor does not pay the tax, the person receiving the gift may have to pay the tax. Tax returns are only needed if the gift exceeds the exclusion amount.

Use Form 709 to report the following:
 * Transfers subject to the federal gift and certain generation-skipping transfer (GST) taxes and to figure the tax due, if any, on those transfers.
 * Allocation of the lifetime GST exemption to property transferred during the transferor's lifetime.

All gift and GST taxes must be figured and filed on a calendar year basis.
 * List all reportable gifts made during the calendar year on one Form 709. This means you must file a separate return for each calendar year a reportable gift is given (for example, a gift given in 2018 must be reported on a 2018 Form 709).
 * Do not file more than one Form 709 for any one calendar year.

Additional information:
 * Spouses may not file a joint gift tax return. Each individual is responsible for his or her own Form 709.
 * Gifts of community property are considered to be made one-half by each spouse.
 * You must file a gift tax return to split gifts with your spouse (regardless of their amount), but your spouse does not have to file if either
 * only you made any gifts and the total was less than twice the annual exclusion, or
 * only you made any gifts with a total of more than the annual exclusion and less than twice the annual exclusion, and your spouse made gifts under the annual exclusion to another party.
 * Likewise, each spouse must file a gift tax return if they have made a gift of property held by them as joint tenants or tenants by the entirety.
 * Only individuals are required to file gift tax returns. If a trust, estate, partnership, or corporation makes a gift, the individual beneficiaries, partners, or stockholders are considered donors and may be liable for the gift and GST taxes.

If you are a citizen or resident of the United States, you must file a gift tax return if it meets the situations described in the Form 709 Instructions. See the instructions for additional filing information and rate schedules.

Nonresidents not citizens of the United States are subject to gift and GST taxes for gifts of tangible property situated in the United States.

Examples of filing requirements
Harold and Winifred are married. Harold gave $28,000 to his daughter from a previous marriage in 2021. If Winifred does not consent to spitting gifts, Harold is required to file a gift tax return, but Winifred is not.

Harold and Winifred are married. Harold gave $28,000 to his daughter from a previous marriage in 2021. If Winifred consents to spitting gifts, Harold must file a gift tax return, and Winifred must give her consent on his return, but does not have to file her own return. If the gift had been $34,000, both would have had to file a return.

Harold and Winifred are married. Harold gave $14,000 to his daughter from a previous marriage and $14,000 to Winifred in 2021. If Winifred gives $14,000 to Harold’s daughter from a previous marriage or anyone else, neither Harold nor Winifred is required to file a return.

Hal and Wendy live in a community property state. Wendy gave $28,000 of community property  to her son from a previous marriage in 2021. Neither Wendy nor Hal is required to file a gift tax return since each is considered to have made a gift of $14,000.

Hal and Wendy live in a community property state. Wendy gave $20,000 of community property and $4,000 of her separate property to her son from a previous marriage in 2021. Wendy’s gift is considered to be $10,000 plus $4,000, and Hal’s gift is considered to be $10,000, so no gift tax returns are required. If Wendy had given $26,000 of community property and $4,000 of her separate property to her son from a previous marriage, Wendy would have to file a gift tax return, but Hal would not.

Transfers not subject to the gift tax
Four types of transfers are not subject to the gift tax. These are: These transfers are not “gifts” as that term is used on Form 709 and its instructions.
 * Transfers to political organizations,
 * Transfers to certain exempt organizations,
 * Payments that qualify for the educational exclusion,
 * Payments that qualify for the medical exclusion.