What is a gift tax? When is a gift taxable? When are we required to file gift tax returns? Who files the gift tax return?
A gift tax is a wealth transfer tax while alive and together with the estate tax at death are both part of the unified transfer tax system.
The IRS allows the taxpayer non-taxable gifts per individuals and charities up to $15,000 in 2018 without filing a gift tax return. This limit is called the annual exclusion. Gifts to spouse are unlimited and no gift tax return is required.
Most of us give gifts for 529 plans, birthdays, showers for babies, marriages, not to mention schools, medical we paid for others not reimbursed by insurance. Gifts can be personal, tangible or intangible. Did we ever think about how much this comes to? Should we be tracking these gifts? Frugal Brenda thinks so.
Gifts to be non-taxable must be of present value (an unrestricted right to possession and enjoyment) and not future value (an event happening later). Charities must receive entire interest in gift. Medical and educational gifts are non-taxable if paid on behalf of an individual and made directly to the third party.
The excess of the annual exclusion ($15,000) is a taxable event which are required to file a gift tax return Form 709 by the donor. There is no Married Filing Joint gift tax return so each spouse files their own gift tax return. There are many planning strategies a married couple can use to make the most of their taxable gift giving. One way is gift splitting (a later blog).
Filing IRS Form 709 should be considered when filing your annual tax returns, when applicable. The due date to file the return is April 15 of the year following that the gift was made (including extensions).
Contact Brenda for assistance with filing tax returns.
AFSP Record of Completion by IRS