Not only is April 15 the deadline to file a 2023 income tax return and pay any taxes due, it’s also the deadline to file a gift tax return. If you made substantial gifts of wealth to family members in 2023, you may have to file a gift tax return. It’s due by April 15 of the year after you make the gift, so the deadline for 2023 gifts is coming up soon. But you can extend the deadline to October 15 by filing for an extension.
When a return is required
Generally, a federal gift tax return (Form 709) is required if you make gifts to or for someone during the year that exceed the annual gift tax exclusion ($17,000 per person for 2023 and $18,000 per person for 2024). There’s a separate exclusion for gifts to a noncitizen spouse ($175,000 for 2023 and $185,000 for 2024).
Also, if you make gifts of future interests, such as transfers to a trust for a donee’s benefit, even if they’re less than the annual exclusion amount, a gift tax return is required. Finally, if you split gifts with your spouse, regardless of the amount, you must file a gift tax return.
Being required to file a form doesn’t necessarily mean you owe gift tax. You’ll owe tax only if you’ve already exhausted your lifetime gift and estate tax exemption ($12.92 million for 2023 and $13.61 million for 2024).
When a return isn’t required
No gift tax return is required if you:
• Paid qualifying educational or medical expenses on behalf of someone else directly to an educational institution or health care provider,
• Made gifts of present interests that fell within the annual exclusion amount,
• Made outright gifts to a spouse who’s a U.S. citizen, in any amount, including gifts to marital trusts that meet certain requirements, or
• Made charitable gifts and aren’t otherwise required to file Form 709 — if a return is required, charitable gifts should also be reported.
If you transferred hard-to-value property, such as artwork or interests in a family-owned business, consider filing a gift tax return even if you’re not required to. Adequate disclosure of the transfer in a return triggers the statute of limitations, generally preventing the IRS from challenging your valuation more than three years after you file.
In some cases, it’s even advisable to file Form 709 to report nongifts. For example, suppose you sold assets to a family member or a trust. Again, filing a return triggers the statute of limitations and prevents the IRS from claiming, more than three years after you filed the return, that the assets were undervalued and, therefore, partially taxable.
Turn to us for help
Estate tax rules and regulations can be complicated. If you need help determining whether you need to file a gift tax return, contact us.