Any taxable gift funds that is subject to the gift tax or generation-skipping transfer taxes must be reported to the IRS using Form 709. This form lists all taxable gifts you've given during your lifetime, including gifts of tangible assets or cash like real estate. During each year in which you make a taxable gift, Form 709 must be submitted along with your tax return. Find out more about IRS Form 709 below.
What is IRS Form 709 ?
Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, is a tax form used by individuals to report taxable gifts made during the year. Form 709 must be filed by any individual who gives a gift to another person. This includes gifts of property, cash, or any other assets.
Form 709 is a Internal Revenue Service (IRS) tax form used to report gifts that exceed the annual exclusion amount. The annual exclusion amount is the maximum amount of gifts that an individual can give to another person without incurring any gift tax. For the year 2023, the annual exclusion amount for gifts is $17,000 per recipient per year.
The purpose of Form 709 is to help the IRS keep track of an individual's cumulative lifetime gifts, which may be subject to gift tax. While most gifts are not subject to tax, if an individual gives more than the annual exclusion amount to any one person in a given year, they may be required to pay gift tax on the excess amount.
IRS Form 709 is also used to allocate lifetime generation skipping tax exemptions, when transferring property to a beneficiary who is not related by marriage, adoption, or blood and who is at least 37½ years younger than the donor.
Key Facts of Form 709
- According to the Internal Revenue Service (IRS), if you gave gifts to an individual in 2023 that total more than $17,000, you most likely need to file Form 709.
- Form 709 must be filed by the donor (the person making the gift) if they have made a gift that exceeds the annual exclusion amount.
- The form is used to calculate any gift tax that may be due and to keep track of the lifetime gift tax exemption.
- Financial gifts of a certain kind may be exempt from the gift tax.
- Every year you make a taxable gift, Form 709 must be submitted together with your regular tax return.
How the Form 709 Works ?
Tax Form 709 works by requiring individuals to report gifts that exceed the annual exclusion amount to the IRS. When an individual gives a gift to another person that exceeds the annual exclusion amount, the amount of the gift that exceeds the exclusion is considered taxable and must be reported on Form 709. The gift tax applies to the donor, not the recipient of the gift. The form is also used to report gifts to non-U.S. citizen spouses and generation-skipping transfers.
In addition to reporting the gift, Form 709 is used to keep track of the lifetime gift tax exemption. The lifetime gift tax exemption is the total amount of taxable gifts an individual can make during their lifetime without paying gift tax.
If the donor has not used up their lifetime gift tax exemption, the excess amount may be applied to their lifetime exemption and may not result in any actual tax liability. The lifetime exemption for 2023 is $12.92 million, which means that an individual can give gifts up to this amount over their lifetime without incurring any gift tax.
In addition to reporting gifts that exceed the annual exclusion amount, Form 709 can also be used to report other types of transfers, such as transfers to a trust or transfers of property with a retained life interest. These transfers may be subject to special rules and calculations, and individuals should consult with a tax professional if they are unsure how to report them on Form 709.
Who Must File Form 709 ?
Individuals who make gifts that exceed the annual exclusion amount in a given year are required to file Form 709 with the IRS. This includes both U.S. citizens and residents, as well as nonresident aliens who make gifts of property located in the United States.
It's important to note that the gift tax applies to the donor, not the recipient of the gift. This means that the person who gives the gift is responsible for paying any gift tax owed, and for filing Form 709 to report the gift to the IRS.
The following individuals may be required to file Form 709 :
1) Anyone who gives a gift that exceeds the annual exclusion amount :
For the year 2023, the annual exclusion amount is $17,000 per recipient per year. If you give a gift to someone that exceeds this amount, you must file Form 709.
2) Anyone who gives a gift to a non-U.S. citizen spouse :
If you give a gift to your spouse who is not a U.S. citizen, the gift may be taxable and you may be required to file Form 709.
3) Anyone who makes a generation-skipping transfer :
If you make a generation-skipping transfer, which is a transfer of property to a person who is more than one generation younger than you, you may be required to file Form 709.
It's also worth noting that some gifts are exempt from gift tax and do not require the filing of IRS gift tax form. These include gifts made to a spouse who is a U.S. citizen, gifts to qualified charitable organizations, and payments made directly to educational or medical institutions on behalf of someone else.
In addition, spouses who split gifts must also file Form 709, even if the gifts made individually by each spouse are below the annual exclusion amount. This is because gifts made by one spouse can be treated as made one-half by each spouse if both spouses consent to the split gift.
What is Considered as a Taxable Gift ?
In addition to exceeding the annual exclusion amount, certain gifts are always considered taxable gifts regardless of their value, including :
Gifts of future interests :
If you make a gift of a future interest in property, such as a remainder interest in a house or a trust, the gift is considered taxable even if its value is less than the annual exclusion amount.
Gifts to a trust :
If you make a gift to a trust, the gift may be taxable depending on the terms of the trust and the identity of the beneficiaries.
Gifts to political organizations :
Gifts to political organizations are generally considered taxable.
Gifts to your spouse who is not a U.S. citizen :
If you make a gift to your spouse who is not a U.S. citizen, the gift is considered taxable if it exceeds the annual exclusion amount.
Some examples of situations where gifts may be taxable include :
- An adult child receiving money for a down payment on a house as a present.
- Giving someone a gift of real estate or other property.
- Direct cash gifts offered to students to assist with school costs.
- Forgiveness of loans you have extended to others.
- On behalf of a beneficiary other than you or your spouse, funds deposited into a 529 college savings account.
IRS Gift Tax Annual Exclusion Limit for 2023
In 2023, the annual exclusion limit for gifts is $17,000 ($16,000 in 2022). For married couples who file a joint return, this limit doubles to $34,000 ($32,000 in 2022).
If you are married and have three children, you and your spouse may jointly give each of them up to $34,000 in 2023 without going over the exclusion amount because the restriction applies per recipient. Gift splitting is what it's called, but you can only use it if you and your spouse file a joint tax return.
The lifetime gift tax exemption limit is $12.92 million for 2023, up from $12.06 million in 2022.
How to Get Form 709 ?
You can obtain Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, from the IRS website. You can either download a fillable PDF version of the form or request a paper copy to be mailed to you. Here are the steps to obtain the form from the IRS website :
- Go to the IRS website at www.irs.gov.
- Click on the "Forms & Instructions" tab at the top of the page.
- Click on "Forms and Publications" and then type "709" in the search bar.
- Click on the link for "Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return."
- You can either download a fillable PDF version of the form or request a paper copy to be mailed to you by clicking on the appropriate link.
If you prefer to request a paper copy of Form 709, you can call the IRS at 1-800-TAX-FORM (1-800-829-3676) and request that a form be mailed to you.
- Form 709 PDF (IRS Gift Tax Form)
- Form 709 Instructions
How to Fill Out IRS Form 709 ?
IRS Form 709 is used to report gifts that are subject to federal gift and generation-skipping transfer taxes. Here's how to fill out Form 709 :
- Download and print a blank copy of Form 709 from the IRS website.
- Begin by filling out the taxpayer's identifying information at the top of the form, including the taxpayer's name, address, and Social Security number.
- Next, provide the name and Social Security number of the donor for whom the gift is being reported.
- Provide the name and address of the donee (recipient) of the gift, as well as the date of the gift.
- In Part 1 of the form, you will need to indicate the fair market value of the gift at the time it was given. If the gift was not in the form of cash, you will need to provide a detailed description of the gift.
- In Part 2, you will need to calculate the total amount of taxable gifts made during the donor's lifetime. This is done by adding up the amounts from Part 1 of all prior gift tax returns filed by the donor, if any, and entering the total in the appropriate space.
- In Part 3, you will need to calculate the total tax due on the gift being reported. This is done by using the applicable tax rate and applying any available credits.
- Finally, sign and date the form, and make a copy for your records.
How to File IRS Form 709 ?
During any tax year in which you make a taxable gift, you must submit Form 709 unless you qualify for one of the aforementioned exemptions. You cannot finish this form online if you file your taxes electronically using online tax preparation software. Form 709 must be printed and mailed to the Internal Revenue Service (IRS).
To file Form 709, you will need to follow these steps :
1) Obtain a copy of Form 709 :
You can download a copy of Form 709 from the IRS website or request a paper copy by calling the IRS.
2) Gather the necessary information :
You will need to gather information about the gift or gifts you made, including the date of the gift, the fair market value of the gift, and the identity of the recipient.
3) Complete Form 709 :
Fill out Form 709, providing the required information about your gifts. If you made gifts to multiple recipients that exceeded the annual exclusion amount, you will need to provide information about each gift separately.
4) Calculate the tax owed (if any) :
If the total value of the gifts you made exceeds the lifetime exemption amount, you will owe gift tax on the excess amount. Use the instructions provided with Form 709 to calculate the tax owed.
5) File Form 709 :
Once you have completed Form 709, you will need to file it with the IRS. The deadline for filing Form 709 is generally April 15 of the year following the calendar year in which the gift was made. If you are requesting an extension to file your personal income tax return, this extension will also apply to your Form 709.
6) Retain a copy for your records :
Keep a copy of Form 709 for your records.
It's important to note that if you have made gifts in previous years that were not reported on Form 709, you may need to file an amended return to report those gifts and pay any associated taxes. The gift tax rules can be complex, and there may be exceptions or special rules that apply in certain situations. If you are unsure whether you need to file Form 709, you should consult with a tax professional.
Where to Mail Form 709 ?
You can mail Form 709 to the following address :
Department of the Treasury
Internal Revenue Service Center
Kansas City, Missouri (MO), zip code 64999
Make sure to include all required attachments and to use the correct mailing address for your specific state, as different states may have different addresses for filing Gift tax Form 709. It is also recommended that you use certified mail or a delivery service that provides tracking and proof of delivery to ensure that your form is received by the IRS.
Frequently Asked Questions
What is the annual exclusion amount for gifts in 2023?
The annual exclusion amount for gifts in 2023 is $17,000 per recipient per year.
What happens if I don't file IRS 709 Form?
If you are required to file Form 709 and fail to do so, you may be subject to penalties and interest on any unpaid gift tax.
What is the lifetime gift tax exemption?
The lifetime gift tax exemption is $12.92 million for tax year 2023.
How much of your parents' estate may you inherit without paying taxes?
You can receive $12.92 million from your parents during their lifetimes without the gift tax applying to the inheritance.
Can I use Form 709 to report gifts made to a foreign person?
Yes, you can use Form 709 to report gifts made to a foreign person. However, if the gift is made to a nonresident alien, there may be special rules and requirements that apply.
Can I file Form 709 (gift tax) electronically?
At present, Form 709 IRS cannot be filed electronically. It must be filed by mail.
Are there any gifts that are exempt from gift tax?
Yes, there are several types of gifts that are exempt from gift tax, including gifts made to a spouse who is a U.S. citizen, gifts to qualified charitable organizations, and payments made directly to educational or medical institutions on behalf of someone else.
How long should I keep records related to Form 709?
You should keep records related to Form 709 for at least three years from the date you file the return or the due date of the return, whichever is later.