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Do You Need to File a Gift Tax Return?

If you gifted cash or other property to others in 2018, you may have a gift tax filing requirement.  Gifts may also include interest-free loans or below-fair-value sales.  The receipt of an inheritance is not considered a gift. 

How are gifts taxed to the recipient?

Gifts are not taxable income to the recipient of the gift, no matter how large the gift.  However, for appreciated property received, the tax basis in the property carries forward from the donor, so if appreciated property is received and then sold right away, a taxable gain could be triggered.    

How are gifts taxed for the donor?

For the person giving the gift, there is generally no tax due on the making of the gift unless the donor has, over time, gifted more than the “lifetime exclusion”, which is over $11 million per person in 2018.  Even though there may be no gift tax due, a gift tax return may be required to report certain gifts you are making.

Filing requirements

The purpose of filing a gift tax return is to keep a running total of gifts you have made during your lifetime, so that the IRS knows if or when you exceed your lifetime exclusion.  Generally, you must file a gift tax return for 2018 if, during the tax year, you made gifts:

  • That exceeded the $15,000 per-recipient gift tax annual exclusion (other than to your U.S. citizen spouse),
  • That exceeded the $152,000 annual exclusion for gifts to a non-citizen spouse,
  • To a Section 529 college savings plan and wish to accelerate up to five years’ worth of annual exclusions ($75,000) into 2018, or
  • Of future interests — such as remainder interests in a trust — regardless of the amount

The $15,000 annual exclusion is per recipient, and per donor.  For example, a married couple in a community property state such as Wisconsin could gift up to $60,000 to their adult daughter and her spouse ($15,000 from each parent to daughter, and $15,000 from each parent to daughter’s spouse).   Under this scenario, no gift tax return filing would be required.

Due date of the gift tax return

If you are required to file a gift tax return, the due date of the return is the same as the individual income tax filing deadline (April 15, 2019 for gifts made in 2018).  An extension is available.  If you owe gift tax, the tax is due and payable by April 15, 2019. 

Please contact Wegner CPAs if you would like more information about gift tax returns.

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