A blog post

Did you make $$$ a gift last year? You MIGHT need to file a Gift Tax Return.

Posted on the 09 February, 2018 at 10:11 am Written by in Personal & Family, Taxes

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Form 709 is required IF:

  • If the total value of all gifts you make to a single person within the same calendar year exceeds $14,000. Gifts that don’t exceed $14,000 per year to the same person qualify for the annual exclusion from gift taxes.  So if you give your son $10,000 to buy a car and another $10,000 to pay off his credit card debt  you’re actually made a taxable gift to him in the amount of $6,000—$20,000 less the $14,000 exclusion.

Spouses Can “Split” Gifts 

If you or your spouse gives one or more gifts to the same person that exceed $14,000 in value in the same calendar year, you can agree to “split” the gifts between the two of you.

If your spouse gives his son $10,000 to buy a car and another $10,000 to pay off his credit card debt, he has two options even if the entire $20,000 came from an account in his sole name. He can file Form 709 and report $6,000 in taxable gifts to his son, or he can file Form 709 and report that the two of you have elected to divide the gifts between you. In this case, each of you is deemed to have made a $10,000 gift to the son, each coming in under the $14,000 annual exclusion limit so no tax would be due.

What Gifts Are Not Subject to the Gift Tax?

Currently, there are three types of such transfers that are not actually considered gifts at all for federal gift tax purposes: (1) annual exclusion gifts,  (2) certain payments for educational expenses, and (3) certain payments for medical expenses.

The following rules must be strictly adhered to in order for payments for educational expenses to be nontaxable gifts:

  1. The payment must be made directly to the institution providing the education, not to the individual receiving the education.
  2. The payment must be made for tuition only.

Payments that qualify for the medical exclusion are payments made directly to an institution that provides medical care to an individual or to a company that provides medical insurance to an individual, and expenses for medical care are the same as those deductible for income tax purposes.

But note that the payment must be made , not to the individual receiving the medical care or insurance benefit, otherwise the payment will be considered a taxable gift if it exceeds $14,000.