Gift Tax Return
What Is a Gift Tax Return?
A gift tax return is a federal tax return that must be filed under certain conditions by the provider of a gift. (It is not a tax on returning gifts.) The return is known as Form 709.
How the Gift Tax Return Works
Individuals who give a gift that surpasses the annual or lifetime exempt gift limit laid out by the Internal Revenue Service (IRS) must finish up the form while filing their taxes. The annual exemption limit is $15,000 per gift for 2021 ($16,000 for 2022), and the lifetime exemption in 2021 is $11.7 million ($12.06 million for 2022). The lifetime exemption is inflation-indexed, so it will rise year-over-year.
For 2022, if an individual gifts anything over the limit, even $16,001, to a single beneficiary, that individual must finish up a gift tax return form. The return must be filled out on the grounds that gifts over the exempt amount are subject to a gift tax.
The gift tax return is just utilized by the people who have given over $15,000 in 2021 ($16,000 for 2022). As the regulations applied to gift taxes are extremely convoluted, it is best to counsel a professional as well as your local tax law. To stay away from the gift tax, many individuals use estate planning, working with a financial planner, tax professional, or attorney to decisively pick when, how, and who gets the estate proprietor's money.
Who Files the Gift Tax Return and Who Pays the Gift Tax?
A gift tax is a federal tax applied to an individual giving anything of value to someone else. For something to be viewed as a gift, the getting party can't pay the provider full value for the gift however may pay an amount not exactly its full value.
A gift tax return is a form that must be filed by a gift-provider assuming they give any amount over the gift tax exemption. Except if special arrangements have been made, it is generally the gift-provider, not the beneficiary, who is responsible for paying the gift tax and for filing the gift tax return.
The gift tax return is IRS Form 709. The receiver of the gift might pay the gift tax, or a percentage of it, on the provider's behalf, if the provider has surpassed their lifetime gift exclusion limit.
The federal government permits married couples who file together to double the amount of their gift tax through a cycle called gift splitting. Married couples consolidate their individual allowances as though each contributed half of the amount.
For gift splitting to be official, the two mates must consent to the gift and determine the situation wherein the gift was given while filing their taxes. A couple filing a gift tax return in 2022 could gift $32,000 before the provider expected to pay taxes on the amount.
Features
- Providers of gifts worth more than $15,000 for 2021 ($16,000 for 2022) to a single beneficiary must finish up a "gift tax return" with their annual tax return.
- A few gifts are exempt from this rule, including gifts given to pay tuition and medical bills.
- The gifts must surpass a lifetime amount of $11.7 million (indexed for inflation) to a single beneficiary to be taxed starting around 2021 ($12.06 million for 2022).
