Read This if You’re Unsure About Filing a Gift Tax Return

One simple way to reduce your taxable estate is to gift assets to loved ones. What’s not as straightforward is determining whether or not you need to file Form 709, the federal gift tax return. Read on to figure out if you need to file this form before the April 17 deadline.

Return required

The following gifts are taxable and will require Form 709, the federal gift tax return:

  • Gifts of present interests where the total amount to any one person was more than $14,000 (the 2017 annual exclusion amount). Examples include: a cash gift, marketable securities, real estate or payment of expenses (excluding qualifying educational or medical expenses — see below),
  • Any split gifts made with your spouse,
  • Gifts of present interests to a non-citizen spouse who otherwise would qualify for the marital deduction, if the total exceeded the $149,000 noncitizen spouse annual exclusion amount (for 2017),
  • Future interests gifts, regardless of the amount, like certain gifts in trust and some unmarketable securities, or
  • A 529 plan contribution where you elected to accelerate future annual exclusion amounts (up to five years’ worth) into the current year.

Return not required

The following gifts do not require Form 709:

  • Gifts paid directly to an educational institution or health care provider on behalf of someone else (qualifying educational or medical expenses only),
  • Present interests gifts that fell within the annual exclusion amount,
  • Gifts made outright to a spouse who’s a U.S. citizen, no matter the sum, including gifts to marital trusts that meet certain requirements, or
  • Charitable gifts — unless From 709 is otherwise required. In that case, charitable gifts should also be reported.

In some instances you might look at filing a gift tax return even if you’re not required to. (Think about hard-to-value property, like artwork of a stake in a family-owned business.) Disclosing to the IRS when these valuables change hands triggers the statute of limitations, preventing the government from challenging your valuation more than three years after you file.

On occasion it’s advisable to file Form 709 to report nongifts, such as selling assets to a family member or trust, for example. Here again, your return triggers the statute of limitations and prevents the IRS from coming at you more than three years later, claiming that the assets were undervalued and partially taxable.

We at JLK Rosenberger are here to help. Contact us (or call 949-860-9902) if you made gifts last year and are unsure if you should file a gift tax return.