What are the tax rules for gifts and gift taxes?

IRS Gift Tax Exemptions and Reporting Requirements for 2023

Gift Tax Exemptions for 2023

- Annual Exclusion Amount: For the year 2023, the annual exclusion amount for gifts is $17,000 per donee. This means that an individual can give up to $17,000 to another person without incurring any gift tax liability or having to report the gift to the IRS.

- Gift Splitting: If spouses choose to split gifts, they are each entitled to the annual exclusion amount, effectively allowing them to give $34,000 to a donee without any gift tax consequences.

- Educational and Medical Exclusions: Payments made directly to an educational institution for tuition or to a medical care provider for medical expenses are not considered taxable gifts and do not count towards the annual exclusion limit.

- Gifts to Spouses: Gifts made to one's spouse are generally not subject to gift tax.

- Gifts to Political Organizations: Gifts to political organizations for their use are not considered taxable gifts.

- Charitable Gifts: Gifts to qualifying charities are deductible from the value of the gift(s) made.

Reporting Requirements for 2023

- Form 709: Individuals must file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, to report taxable gifts that exceed the annual exclusion amount and other reportable gifts as outlined in the instructions for Form 709.

- Filing Deadline: The deadline for filing Form 709 is April 15 of the year following the year in which the gift was made. Extensions to file can be requested.

- Adequate Disclosure: For a gift to be adequately disclosed on Form 709, the return must include all required information as specified in the instructions, including descriptions of the gifts, the fair market value, and any available exclusions or deductions.

- Supplemental Information: If additional information becomes available after the filing of Form 709, a supplemental Form 709 may be filed with the new information clearly stated.

Additional Considerations

- Fair Market Value: The fair market value of a gift is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell.

- Gift Tax Rate: The gift tax rate varies depending on the amount of the gift and the donor's past gift history. The tax rate schedules can be found in the instructions to Form 709.

- Gift Tax Payment: Generally, the donor is responsible for paying the gift tax. However, arrangements can be made for the donee to pay the tax instead.

Please ensure that all gift tax filings comply with the current year's regulations and deadlines as provided by the IRS.

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Sources:

Frequently Asked Questions on Gift Taxes | Internal Revenue Service 2024-07-16

Instructions for Form 709 (2023) | Internal Revenue Service 2024-08-01

What's New - Estate and Gift Tax | Internal Revenue Service 2024-08-03

Estate Tax | Internal Revenue Service 2024-08-03

Publication 463 (2023), Travel, Gift, and Car Expenses | Internal Revenue Service 2024-08-04

Publication 15-B (2024), Employer's Tax Guide to Fringe Benefits 2024-08-02

2023 Instructions for Form 990 Return of Organization Exempt From Income Tax 2024-08-03

Digital assets | Internal Revenue Service 2024-08-02

De Minimis Fringe Benefits | Internal Revenue Service 2024-08-03