March 28, 2024 •HoganTaylor
April 15 marks more than just the deadline for filing your 2023 income tax return and settling any tax obligations; it's also the cutoff for filing a gift tax return. If you've made substantial gifts of wealth to family members in 2023, you're likely required to file a gift tax return, due by April 15 of the following year. But don't worry; an extension is possible, pushing the deadline to October 15 upon filing.
When is a Return Required?
In general, a federal gift tax return (Form 709) is necessary if your gifts to or for someone during the year exceed the annual gift tax exclusion, which stood at $17,000 per person for 2023 and has risen to $18,000 per person for 2024. Additional exclusions apply to gifts to a noncitizen spouse, set at $175,000 for 2023 and $185,000 for 2024.
Moreover, if you've made gifts of future interests, such as transferring assets to a trust for a beneficiary's benefit, a gift tax return is obligatory, irrespective of the amount. The same holds true if you've split gifts with your spouse, regardless of their magnitude. Importantly, filing a return doesn't necessarily imply owing gift tax; tax liability arises only upon depleting your lifetime gift and estate tax exemption, which was $12.92 million for 2023 and has now reached $13.61 million for 2024.
When is a Return Not Required?
You're off the hook for filing a gift tax return if you've:
- Covered qualifying educational or medical expenses directly to the respective institutions or providers.
- Made outright gifts within the annual exclusion amount.
- Granted gifts to a U.S. citizen spouse, regardless of amount, including transfers to marital trusts meeting specific criteria.
- Donated to charities without meeting the threshold for filing Form 709, though any required returns should include charitable contributions.
Even if not mandated, consider filing a gift tax return for hard-to-value assets like artwork or shares in a family business. Adequate disclosure in a return initiates the statute of limitations, typically shielding against IRS valuation challenges more than three years post-filing.
Additional Considerations
In certain scenarios, it's prudent to file Form 709 to report non-gift transactions. For instance, if you've sold assets to a family member or trust, filing a return sets the statute of limitations in motion, preempting IRS claims of undervaluation more than three years after filing.
Seek Expert Advice
Navigating estate tax regulations can be complicated. If you're unsure about your obligation to file a gift tax return, reach out to us for tailored guidance.
HoganTaylor Estate Planning Services
HoganTaylor estate planning professionals leverage their tax and business advisory expertise to help individuals accomplish goals and minimize tax burden. If you have any questions about the content of this publication, or if you would like more information about HoganTaylor's Estate Planning services, please contact Dan Bomhoff, Estate Planning Lead.
INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.
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