Do You need to file a gift tax return?

If you transfer money or property to anyone during any year without receiving something of at least equal value in return, you may need to file a federal gift tax return (Form 709) by April 15 of the next year. If you live in one of the few states that have a gift tax, you may also need to file a gift tax return with your state.

Some gifts aren’t taxable and generally don’t require a gift tax return. These exceptions include:

  • Gifts to your spouse that qualify for the marital deduction.
  • Gifts to charities that qualify for the charitable deduction. (Filing is not required as long as you transfer your entire interest in the property to qualifying charities. However, if you are required to file a return to report gifts to noncharitable beneficiaries, all charitable gifts must be reported.)
  • Qualified transfers exclusion amounts paid on behalf of anyone, either directly to an educational institution for tuition or directly to a provider for medical care.
  • Annual exclusion gifts totaling $14,000 or less for the year to any one individual and $28,000 for a couple.  (However, you must file a return to split gifts with your spouse. But, if your spouse is not a U.S. citizen, the annual exclusion is increased to $143,000 in 2013 for gifts to your spouse.)

If your gift isn’t exempt from taxation, you’ll need to file a gift tax return. But that doesn’t mean that you have to pay gift tax. Generally, each taxpayer is allowed to make taxable gifts totaling $5,250,000 (in 2013) over his or her lifetime before paying gift tax. Filing the gift tax return helps the IRS keep a running tab on that $5,250,000 basic exclusion amount (sometimes referred to as an exemption).  In 2014 the exclusion amount goes up to $5,340,000.

If you made a gift of property that’s hard to value (e.g., real estate), you may want to report the gift, even if you’re not required to do so, in order to establish the gift’s taxable value. If you do, the IRS generally has only three years to challenge the gift’s value. If you don’t report the gift, the IRS can dispute the value of your gift at any time in the future.


Broadridge Investor Communication Solutions, Inc. does not provide legal, taxation, or investment advice. All the content provided     by Broadridge Investor Communication Solutions is protected by copyright. Forefield claims no liability for any modifications to     its content and/or information provided by other sources.
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