IRS Tax Form 709: Gift Tax
IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, is a form used to report gifts made by individuals that exceed the annual exclusion amount. While the United States generally does not tax small gifts, certain large gifts may be subject to taxation. Form 709 helps ensure that any taxable gifts are reported and that the appropriate tax is paid. This form is also used to report generation-skipping transfers (GST), which are gifts made to beneficiaries that are two or more generations below the donor.
If you make gifts during the year that exceed the annual exclusion limit or are subject to GST, you are required to file Form 709 to report those gifts to the IRS. In this guide, we’ll explain what Form 709 is, who needs to file it, and how to complete the form accurately.
What is IRS Form 709?
Form 709 is a tax return that must be filed by individuals who make taxable gifts or generation-skipping transfers. The gift tax is imposed on the transfer of property during the giver’s lifetime, and the tax is generally paid by the donor (the giver). However, gifts made to spouses, charities, or other qualifying individuals may be exempt from gift tax under certain circumstances.
While most small gifts don’t require the filing of Form 709, larger gifts are subject to tax. Form 709 is used to report those gifts and calculate the amount of tax due, if applicable. The IRS uses this form to track the use of your lifetime gift and estate tax exemption, which allows you to give away a substantial amount of money during your lifetime without incurring gift tax.
Who Needs to File IRS Form 709?
Not everyone is required to file Form 709. You will need to file this form if:
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You Make a Gift Over the Annual Exclusion:
For 2024, the annual gift tax exclusion is $17,000 per recipient. This means that you can give up to $17,000 to any individual without needing to file Form 709. However, if you give more than this amount to any one person during the year, you will need to file Form 709 to report the gift. -
You Make Gifts to a Spouse That Aren’t Covered by the Marital Exclusion:
Gifts made to a spouse are generally exempt from gift tax. However, if you make gifts to your spouse that exceed the annual exclusion and aren’t covered by the unlimited marital deduction, you may need to file Form 709. -
You Make Generation-Skipping Transfers (GST):
If you make gifts to individuals who are two or more generations below you (e.g., grandchildren or great-grandchildren), you may need to file Form 709 to report the GST, which could be subject to additional tax under the Generation-Skipping Transfer Tax. -
You Choose to Split Gifts with Your Spouse:
If you are married, you and your spouse can elect to split gifts that you give to others, thereby doubling the annual exclusion amount. This requires both spouses to file Form 709 to report the split gifts.
Key Sections of IRS Form 709
Form 709 is a multi-page form that requires detailed information about the gifts made during the tax year. Some key sections to pay attention to include:
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Part 1: General Information
This section requests basic information about the donor, such as name, address, and taxpayer identification number (TIN). It also asks about the total amount of gifts made during the year, as well as any gift-splitting elections made with a spouse. -
Part 2: Taxable Gifts
This section provides a summary of the gifts you made during the tax year that are subject to gift tax. It includes details about the recipient(s) and the amount of the gift. You must list gifts made to each individual that exceed the annual exclusion amount, including any gifts to charities or spouses. -
Part 3: Generation-Skipping Transfers (GSTs)
This section is used to report any generation-skipping transfers. These are gifts made to individuals who are two or more generations younger than you, such as grandchildren or great-grandchildren. Generation-skipping transfers are subject to a separate tax, and Form 709 is used to report these transfers and calculate any applicable GST tax. -
Part 4: Calculation of Gift Tax
Here, you will calculate your total gift tax liability based on the taxable gifts you made. The form also takes into account your lifetime gift tax exemption, which for 2024 is $12.92 million. The gift tax calculation is based on the amount of taxable gifts you’ve made, reduced by any applicable exclusions and exemptions. -
Part 5: Tax Computation and Credit
This section is used to determine the actual gift tax due, taking into account any credits and deductions available to you. It includes the use of your lifetime exemption and the application of any prior taxable gifts. -
Signature and Declaration
In this final section, you must sign and date the form to declare that the information provided is correct and complete.
Gift Tax Exemptions and Exclusions
When making gifts, you can take advantage of several key exclusions and exemptions to reduce or eliminate the amount of gift tax owed:
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Annual Gift Tax Exclusion:
For 2024, the annual gift tax exclusion allows you to give up to $17,000 per person without triggering any gift tax reporting requirements. This means that you can give up to this amount to each individual recipient per year without needing to file Form 709. If you are married, both you and your spouse can each give up to $17,000 to the same individual, for a total of $34,000 per recipient. -
Lifetime Gift Tax Exemption:
The lifetime gift tax exemption is the total amount you can give away during your lifetime without incurring gift tax. For 2024, this exemption is $12.92 million. Gifts that exceed the annual exclusion amount may be covered under this exemption, and they reduce the exemption amount available for future gifts or estate tax purposes. -
Unlimited Marital Deduction:
Gifts made to your spouse are generally exempt from gift tax, provided the spouse is a U.S. citizen. If the spouse is not a U.S. citizen, special rules apply. There is no limit to the amount you can gift to your spouse without incurring gift tax, and these gifts do not need to be reported on Form 709. -
Charitable Contributions:
Gifts made to qualified charities are generally not subject to gift tax, and you do not need to report these gifts on Form 709. However, you must ensure that the charity qualifies for the charitable deduction, and the gift must be made directly to the charity.
