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Gift Tax Returns
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Gift Tax Returns
By: Patricia T. Henssler, C.P.A.
The Henssler Financial Group Position Paper
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Generally, you do not need to file a gift tax return (Form 709) unless you give someone, other than your spouse, money or property worth more than the annual exclusion amount, currently $12,000 for 2008, now indexed for inflation. You may make as many $12,000 annual gifts as you wish to any number of individuals, and you are not required to file a gift tax return.
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If any gift to an individual exceeds the annual exclusion amount, a gift tax return must be filed. You can elect to use part of your lifetime exemption against the gift portion in excess of $12,000. You do not have to pay any gift tax with the return.
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You and your spouse can give $24,000 to an individual. However, if the husband writes a check for $24,000, you will need to file Form 709 to elect to split the gift.
In addition to the $12,000 annual exclusion from gift tax, there are several other things you can pay on behalf of an individual that are exempt from gift tax:
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Tuition paid to a qualified educational organization or institution. To be "qualified," the school must be qualified to receive charitable contributions. If you pay your grandchild's tuition, you do not get a charitable deduction, as you are receiving services for your tuition. The check must be made payable to the school — not as a reimbursement to the parent.
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Medical payments on behalf of an individual. Again, the check must be made to the doctor, hospital, insurance company, etc.
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Transfers to a political organization for its own use.
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Charitable gifts fully eligible for charitable deduction.
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You can pay your grandchild's tuition to Harvard for $30,000, send a check to their doctor, give the child $12,000, and still not be required to file a gift tax return.
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You can give $50,000 to the Red Cross, and not file a gift tax return (obviously, this would qualify for a charitable deduction on your Form 1040).
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You can give $23,000 to the Democratic or Republican party and not file a gift tax return. However, this does not qualify for a deduction on Form 1040, as political contributions are no longer deductible.
Gift tax returns are filed on Form 709, U.S. Gift Tax Return.
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The return is due April 15th, but can be extended with Form 4868.
Paying the Gift Tax
The current gift tax rate ranges from 18%-45%. This is imposed on the gift that is in excess of $12,000 to any one individual. If you have not already gifted your lifetime exclusion ($1,000,000 through 2009), you can use part of your lifetime exclusion against the current gift and not pay the current tax due.
| For instance, if you give your daughter $50,000: |
| Gift |
$50,000 |
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| Annual Exclusion |
(12,000) |
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| Balance |
$38,000 |
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| Lifetime Exclusion |
(38,000) |
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| Balance |
0 |
assuming you have not gifted $1,000,000 in the past |
If this is your first gift greater than the annual exclusion ($12,000), your new lifetime exemption is reduced by $38,000 — or $962,000, if you died in 2007.
Practical Pointer
Normally, a gift tax return is not required if the gift is sheltered by the annual exclusion ($12,000). However, the statute of limitations does not begin to run until adequately disclosed on a gift tax return. Therefore, some practitioners advise filing gift tax returns to report gifts below the annual exclusion amount, if there could be a question concerning the value of gifted property. This is not an issue if gifting cash; however, if you are gifting pieces of property, etc., this can be an issue.
If you would like further information regarding this topic or any other tax related issue, please contact The Henssler Financial Group Tax & Accounting Division at 770-428-4025.
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©2008 The Henssler Financial Group | www.henssler.com
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