Gift tax returns generally do not need to be filed unless you give someone, other than your spouse (if he or she is a U.S. citizen) money or property worth more than the gift tax annual exclusion for that year. Here are four more tips regarding the tax treatment of gifts:
- Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year.
- The annual exclusion amount for 2023 is $17,000. You and your spouse can make a gift of up to $34,000 to a third party without making a taxable gift. However, if your gift exceeds the exclusion amount, you will have to file a gift tax return even if no tax is due.
You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses. - Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
- Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
- The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. For example, the following gifts are not taxable:
- Gifts that do not exceed the annual exclusion for the calendar year,
- Tuition or medical expenses you pay directly to a medical or educational institution for someone,
- Gifts to your spouse,
- Gifts to a political organization for its use, and
- Gifts to charities.
If you have any questions about the gift tax, please contact our office for assistance.