What Is a Gift Tax Return?
Let me explain what a gift tax return really is—it's a federal tax return you, as the giver, must file under specific conditions when you give a gift. Don't confuse it with returning gifts; that's not what this is about. The form you need is IRS Form 709.
Key Takeaways
- If you give gifts worth more than $16,000 in 2022 ($17,000 in 2023) to one recipient, you must include a gift tax return with your annual tax filing.
- Certain gifts are exempt, like those paying for tuition or medical bills.
- Taxes kick in only if gifts to a single recipient exceed the lifetime limit of $12.06 million in 2022 ($12.92 million in 2023, adjusted for inflation).
How the Gift Tax Return Works
You need to file this form when filing your taxes if your gift exceeds the IRS annual or lifetime exemption limits. For 2022, the annual limit is $16,000 per gift ($17,000 in 2023), and the lifetime exemption is $12.06 million ($12.92 million in 2023). Remember, the lifetime amount adjusts yearly for inflation.
In 2022, even if you give just $16,001 to one person, you have to fill out the gift tax return because amounts over the exemption are taxable.
This return applies only to those giving over $16,000 in 2022 ($17,000 in 2023). Gift tax rules are complex, so consult a professional and check local tax laws. To avoid taxes, consider estate planning with a financial planner, tax expert, or attorney to decide when, how, and to whom you distribute your assets.
Who Files the Gift Tax Return and Who Pays the Gift Tax?
The gift tax is a federal tax on you when you give something of value to someone else. For it to count as a gift, the recipient can't pay you full value, though they might pay less.
You, the giver, must file the return if your gift exceeds the exemption. Unless you've arranged otherwise, you're responsible for paying the tax and filing Form 709.
The recipient might pay the tax or part of it on your behalf if you've exceeded your lifetime exclusion.
If you're married and file jointly, you can double your gift amount via gift splitting, combining allowances as if each spouse gave half.
For gift splitting to count, both spouses must agree and note it when filing taxes. In 2022, a couple could gift $32,000 without taxes ($34,000 in 2023).
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