Are You Required to File a Gift Tax Return?

If you gave any one person gifts in 2009 that are valued at more than $13,000, you must report the total gifts to the Internal Revenue Service even if you have not exceeded the $1 million gift tax exemption. The gift tax return is used to track the nontaxable gifts and determine when gifts from all years exceed the gift exemption and become taxable. The person who receives your gift does not have to report the gift to the IRS or pay gift or income tax on its value.

Gifts include money and property, including the use of property without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.

There are some exceptions to the tax rules on gifts. The following gifts generally are not taxable and do not count against the annual limit:

• Tuition or Medical Expenses that you pay directly to an educational or medical institution for someone's benefit
• Gifts to your Spouse
• Gifts to a Political Organization for its use
• Gifts to Charities

If you are married, both you and your spouse can give separate gifts of up to the annual limit of $13,000 to the same person without making a taxable gift.

Alternatively, with consent from your spouse, you can make a gift of up to $26,000 ($13,000 x 2) to the same person without making a taxable gift. This is commonly known as splitting gifts between spouses. Essentially, it means a gift by you or your spouse to a third person can be considered as made one-half by each of you provided there is consent by both spouses.

If you need assistance determining if you are liable for a gift tax return, please give us a call.

Print-Friendly

Send to Friend

Ask a Question

---