You may have heard (maybe from me) that you can gift up to $15,000 per year per donor per gift recipient. You do have to make sure that the gift is a gift of a present interest. A gift of a present interest means the recipient can use the funds immediately. As long as you meet the requirements, you don't have any requirement to do anything with the IRS. No filing. No nothing.
What if you don't meet those requirements? Well, then the IRS wants to know. You'll let them know by filing a Form 709. The form is due on April 15th of the year after the gift was made. Just like your income tax return. And just like your income tax return, you can file an automatic extension (Form 4868) and extend the due date until October 15th.
The form isn't too complicated. For most gifts you list who received the gift and how much the gift was. Then you run some calculations to determine if the gift is taxable. For most of us, that won't be the case as the lifetime gift-tax exclusion is in excess of $11M. And in case you were wondering, the gifts under $15,000 that you don't have to report, don't count towards this limit.
There is another part of the form that you need to complete. You need to list and total all previous taxable gifts to determine if you've exceeded the lifetime limit. When you pass away your executor will need this information to determine if any of your estate is taxable. This is because taxable gifts reduce your estate tax exemption. So, you'll want to keep your Forms 709 indefinitely.
If you look at a Form 709, you'll notice sections for "Direct Skips" and "Indirect Skips". These sections are for the Generation Skipping Tax (Yes, there is such a thing). The Generation Skipping Tax is pretty complicated and we'll pass on that for this article.
One last note. None of this applies in regards to gifts to your spouse. The IRS considers a married couple a single economic entity so there is no limit to gifts to a spouse. I hope my wife reads this blog post...
If you liked this blog article, you might enjoy the following blog posts:
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. C.L. Sheldon & Company, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to C.L. Sheldon & Company, LLC website or incorporated herein, and C.L. Sheldon & Company, LLC takes no responsibility therefore. All such information is provided solely for convenience, educational, and informational purposes only and all users thereof should be guided accordingly. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.