Have you generously gifted your children, grandchildren, or others in the previous year? If so, it’s crucial to ascertain whether you need to file a 2023 gift tax return. Sometimes, even if not mandatory, filing one could be advantageous.
Who needs to file?
The annual gift tax exclusion has risen to $18,000 in 2024, up from $17,000 in 2023. Generally, you're required to file a gift tax return for 2023 if, during that tax year, you made gifts:
Exceeding the $17,000-per-recipient gift tax annual exclusion for 2023 (excluding gifts to your U.S. citizen spouse),
Intended to be split with your spouse to utilize your combined $34,000 annual exclusion for 2023,
Surpassing the $175,000 annual exclusion in 2023 for gifts to a noncitizen spouse,
Contributed to a Section 529 college savings plan and aimed to accelerate up to five years’ worth of annual exclusions ($85,000) into 2023,
Of future interests, such as remainder interests in a trust, regardless of the amount, or
Of jointly held or community property.
Remember, you’ll owe gift tax only to the extent that an exclusion doesn’t apply and you’ve utilized your lifetime gift and estate tax exemption ($12.92 million for 2023). Thus, some transfers necessitate a return even if no tax is owed.
Who might consider filing?
No gift tax return is obligatory if your 2023 gifts were solely tax-free, qualifying as:
Annual exclusion gifts,
Present interest gifts to a U.S. citizen spouse,
Direct payments for educational or medical expenses to a school or healthcare provider, or
Political or charitable contributions.
However, if you transferred property with a hard-to-determine value, like artwork or interests in a family-owned business, filing a gift tax return could be wise, even if not mandatory. Adequate disclosure in a return initiates the statute of limitations, typically preventing the IRS from disputing your valuation more than three years after filing.
This year's deadline.
The gift tax return deadline coincides with the income tax filing deadline. For 2023 returns, it’s Monday, April 15, 2024 — or Tuesday, October 15, 2024, with an extension. Remember, if you owe gift tax, the payment deadline is April 15, regardless of extension status. If unsure about your obligation to file a 2023 gift tax return using IRS Form 709, don’t hesitate to contact us.
Schedule Today
Begin filing your returns today by scheduling a meeting with your VAAS Tax Consultant or uploading your tax files via our secure client portal. We look forward to working with you this tax season. Â